What is a Fixed Rate Mortgage?

A fixed rate mortgage is a mortgage that has a locked in interest rate. From the time you apply for your loan the interest rate will not change through the duration of your loan. This can be beneficial if you get locked in to a low interest rate and allow you to keep it through a 15 or 30 year period. It is unlike adjustable rate mortgages because the rates will not fluctuate with the current market. You may still have the option to refinance if the interest rates are lowered, but you need to check with your individual lenders for these options. Each bank and lender has individual terms and conditions on their loans, so make sure that you don’t have any financial penalties if you wish to refinance during your term.

Fixed Rate Mortgage Pros

Some good things about FRMs are:

• Your interest rate stays standard, even if inflation rocks the housing market.
• You will always know your payment, so you can budget your money easier.
• Easier to understand and keep track of
• Much safer, less of a gamble

Fixed Rate Mortgage Cons

• FRMs will be higher then the initial ARM you could receive.
• To take advantage of falling rates you will have to refinance
• FRMs do not fluctuate from lender to lender
• Could get stuck paying a higher then market interest rate.