What Is Fixed-Rate Mortgage?
A mortgage where the interest rate never changes for the life of the loan, keeping payments predictable.
Definition
A fixed-rate mortgage locks in the same interest rate from day one to the final payment, whether the term is 10, 15, 20, or 30 years. Your principal and interest payment never changes, making budgeting straightforward. Fixed-rate mortgages account for roughly 70% of US mortgage originations. The advantage is certainty: if rates rise, you are insulated. The trade-off is that you typically start with a rate slightly higher than an ARM's initial rate, because the lender is bearing the risk of rates rising over time. The 30-year fixed is the most common, offering the lowest monthly payment at the cost of paying more total interest. The 15-year fixed saves substantial interest but has a higher monthly payment.
Example
A $350,000 loan at 6.5% fixed for 30 years: payment $2,213/month, total interest paid $446,680. Same loan at 5.75% for 15 years: payment $2,906/month, total interest $173,080.