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Definition of 'Fixed-Rate Mortgage'
A mortgage that has a fixed interest rate for the entire term of the loan. The distinguishing factor of a fixed-rate mortgage is that the interest rate over every time period of the mortgage is known at the time the mortgage is originated. The benefit of a fixed-rate mortgage is that the homeowner will not have to contend with varying loan payment amounts that fluctuate with interest rate movements.
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Investopedia explains 'Fixed-Rate Mortgage'
There is typically a tradeoff when it comes to choosing a mortgage between risk and reward, or between an adjustable-rate mortgage and a fixed-rate mortgage. Depending on market conditions (the shape of the yield curve), an adjustable-rate mortgage might have a large initial payment advantage over a fixed-rate mortgage. However, if such a scenario exists, there is a probability that the payments on the adjustable-rate mortgage will rise over time. Mortgage borrowers need to understand and measure risks when deciding between an adjustable-rate and fixed-rate mortgage.
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Find out how to choose which mortgage style is right for you.
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In a climate of rising interest rates, having an adjustable-rate mortgage can be risky.
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Search and compare the best fixed and adjustable mortgage rates in your area with Bankrate.com.
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Fixed-rate mortgages are the most common way to finance a home purchase. Find out the pros of cons of this type of loan here.
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Both of these have advantages and disadvantages depending on your financial needs and prospects.
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We walk through the steps needed to secure the best loan to finance the purchase of your home.
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