Fixed-Rate Mortgage
A mortgage with an interest rate that remains constant for the entire life of the loan.
What is Fixed-Rate Mortgage?
A fixed-rate mortgage is a home loan where the interest rate is set at origination and never changes, providing borrowers with predictable monthly principal and interest payments for the life of the loan — typically 15 or 30 years. The stability of fixed-rate mortgages makes budgeting straightforward and protects borrowers from rising interest rates. The trade-off is that fixed-rate mortgages typically start with higher interest rates than adjustable-rate mortgages (ARMs). The 30-year fixed-rate mortgage is the most common home loan in the United States, with rates tracked weekly by Freddie Mac's Primary Mortgage Market Survey.
Example
A borrower takes a 30-year fixed-rate mortgage on a $400,000 home at 6.8%. The monthly principal and interest payment is $2,610 every month for 360 months — never changing regardless of market rate movements. Total interest paid over 30 years is approximately $539,600.