Rich Kushner, BurkeRealEstateConsultants,IncPhone: (858) 405-5270
Email: [email protected]

Fixed rate mortgage definition: What borrowers should know

by Rich Kushner 02/04/2024

To choose the right mortgage loan, it’s important to understand the “fixed rate mortgage” definition. This type of loan has several advantages, including predictable monthly payments and long repayment terms. However, a fixed rate mortgage might not be right for everyone.

Here is a quick guide to understanding this type of mortgage:

Fixed-rate mortgages vs. adjustable-rate mortgages

When comparing mortgages, you’ll encounter fixed rate mortgages and adjustable rate mortgages. As the name suggests, the interest rate of an ARM adjusts with market fluctuations, but the loans are offered at low introductory rates for a limited time period. 

ARMs usually have introductory rates lasting anywhere from one to five years. Once the introductory period ends, your interest rate will increase with a cap of to 2% per year, or 5% over the lifetime of the loan. 

Compared to fixed rate mortgages, ARMs are more complex loan programs and typically better for borrowers who have less intention of staying in the same home for an extended period of time.

Pros & cons of a fixed-rate mortgage

Fixed-rate loans are incredibly affordable because of the predictable nature of their repayments. While the homeowners coverage and taxes may vary, your mortgage payment will remain the same. This affects your budget for the rest of your month, and plays a major part in your financial planning. 

Besides reducing the risk of default on fixed-rate loans, your loan rate remains constant. Whatever your rate is, the amount you paid will remain unchanged when you took the loan. Often, these rates are higher than they would be for an ARM.

How long does it take to repay a fixed-rate mortgage?

Fixed-rate mortgages can be repaid during a predetermined amount of time. They are usually offered as 30-year home loans, giving you a maximum of 30 years to pay the full amount. 

This may seem like a long time, but the extended timeline is one thing that ensures a lower monthly mortgage payment.

There are other options available, such as a 15-year mortgage. These can work well if the borrower has sufficient cash to pay the loan more quickly while still taking advantage of the fixed interest rate.

About the Author

Rich Kushner

I donate 10% of my commission to a charity of the client's choice 

I am committed to helping you with your Real Estate needs and I work with a team of agents locally and nationally - so anywhere you have real estate needs, we can help you, and donate to your favorite cause! Some groups my clients have had me donate to are The Humane Society, Smile Train, Wounded Warriors Freedom Station, Second Chance Dog Rescue and Best Friends, to name a few.

For more than 20 years I have volunteered at the Humane Society, doing PFT program (pet facilitated therapy), where I brought puppies to children's hospitals, and Pets with Santa (picture taking with me as Santa, and people would then make a donation). I have also been active with On The Go, a service where I would drive folks who could no longer drive, to doctor’s appointments, grocery shopping, etc.