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A Fixed Rate Mortgage is simply a mortgage where the interest rate charged the borrower remains fixed over the term on the loan. Since the interest rate does not move with a fixed rate mortgage, the monthly payments on the loan remain fixed throughout the term of the loan. This behavior is in contrast to the adjustable rate mortgage, where the interest rate of the loan can move during the term of the loan.
Comparisons between fixed rate mortgages can be made using the annual percentage rate or APR. The fixed rate mortgage carries the most risk to the lending institution since they bear all of the risks and rewards of falling or rising interest rates. This benefit is passed on to the consumer at a cost. The interest rate on a fixed rate mortgage is usually higher than balloon mortgages or adjustable rate mortgages. |
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