A home loan that that has a fixed interest rate for the entire term of the loan is referred to as Fixed-Rate Mortgage.
Fixed-Rate Mortgage carries a static interest rate from beginning to end.
Repayment terms ranges between 10-30 years for fixed-rate mortgages.
KEY FEATURES OF Fixed-Rate Mortgage.
- Home loan with a fixed interest rate for the entire term of the loan.
- A loan with interest rate that does not fluctuate with market conditions.
- Suitable for borrowers who want predictability and those who tend to hold property for the long term tend to prefer fixed-rate mortgages.
- Most fixed-rate mortgages are amortized loans.
How Fixed-Rate Mortgage Works:
Range of mortgage products are available in the market. Lenders advertise and offer variable, or adjustable-rate mortgages or or fixed-rate loans.
With variable-rate loans, the interest rate isn’t fixed, instead, rates are adjusted above a certain benchmark.
These rates tend to change at certain periods.
Fixed-rate mortgages, on the other hand, carry the same interest rate throughout the entire length of the loan.
Most people who take home loan for the long term end up locking in an interest rate with a fixed mortgage.
They prefer these mortgage products because they’re more predictable.
In short, borrowers know how much they’ll be expected to pay each month so there are no surprises.