Fixed Rate Mortgage

A fixed rate mortgage (FRM) is a fully amortizing loan in which the interest rate remains the same over the entire term of the loan.

What is a Fixed Rate Mortgage?

A fixed interest rate loan differs from an adjustable rate mortgage (ARMs) because ARMs are fixed for a specific number of years and adjust during the life of the loan after that. A fixed rate mortgage has a fixed interest rate for the entire life of the loan, so the monthly mortgage payment does not change.

A fixed mortgage can have terms of 30, 20, 15 or 10 years. A 30-year fixed rate mortgage is the most common mortgage program in the United States, as it offers predictability and stability for a housing budget.

30 Year Fixed Rate Mortgage

The term is the number of years you repay the loan. For example, a 30 year fixed rate mortgage is paid back over the course of 30 years. When you pay a loan back over a longer period, you pay more interest over the life of the loan. While a 30 year fixed rate mortgage is more attractive because of the steady rate, you pay more interest at a higher rate than you would for an adjustable rate mortgage.

30 Year Fixed Rate Mortgage vs. 15 Year Fixed Rate Mortgage

Choosing the right loan term for your fixed interest rate loan depends on your financial situation. A shorter term such as a 15 year fixed rate mortgage usually has a lower interest rate, which allows you to pay less interest over the life of the loan, as compared to a 30 year fixed rate mortgage. One drawback of a 15 year fixed rate mortgage, compared to those with longer terms, is that the monthly payments are higher because the loan principal is paid back over fewer years.