Fixed Rate Mortgage

A Fixed Rate Mortgage is a mortgage whereby the interest rate charged the borrower remains fixed over the term of the loan.  Since the interest rate does not vary with a fixed rate mortgage, the monthly payments on the loan remain constant throughout the term of the loan.  This behavior is in contrast to the adjustable rate mortgage, whereby the interest rate of the loan can change 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.