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JoAnn M. Drabble, Keller Williams ElitePhone: (508) 930-1711
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Fixed rate mortgage definition: What borrowers should know

by JoAnn M. Drabble 10/23/2024

To choose the right mortgage loan, it’s important to understand the “fixed rate mortgage” definition. This type of loan has several advantages, including predictable monthly payments and long repayment terms. However, a fixed rate mortgage might not be right for everyone.

Here is a quick guide to understanding this type of mortgage:

Fixed-rate mortgages vs. adjustable-rate mortgages

When comparing mortgages, you’ll encounter fixed rate mortgages and adjustable rate mortgages. As the name suggests, the interest rate of an ARM adjusts with market fluctuations, but the loans are offered at low introductory rates for a limited time period. 

ARMs usually have introductory rates lasting anywhere from one to five years. Once the introductory period ends, your interest rate will increase with a cap of to 2% per year, or 5% over the lifetime of the loan. 

Compared to fixed rate mortgages, ARMs are more complex loan programs and typically better for borrowers who have less intention of staying in the same home for an extended period of time.

Pros & cons of a fixed-rate mortgage

Fixed-rate loans are incredibly affordable because of the predictable nature of their repayments. While the homeowners coverage and taxes may vary, your mortgage payment will remain the same. This affects your budget for the rest of your month, and plays a major part in your financial planning. 

Besides reducing the risk of default on fixed-rate loans, your loan rate remains constant. Whatever your rate is, the amount you paid will remain unchanged when you took the loan. Often, these rates are higher than they would be for an ARM.

How long does it take to repay a fixed-rate mortgage?

Fixed-rate mortgages can be repaid during a predetermined amount of time. They are usually offered as 30-year home loans, giving you a maximum of 30 years to pay the full amount. 

This may seem like a long time, but the extended timeline is one thing that ensures a lower monthly mortgage payment.

There are other options available, such as a 15-year mortgage. These can work well if the borrower has sufficient cash to pay the loan more quickly while still taking advantage of the fixed interest rate.


About the Author
Author

JoAnn M. Drabble

JoAnn Drabble prides herself in making a "personal investment in each client”. With over ten years of experience working as a paralegal for various law firms, JoAnn brings significant legal expertise to her work. She understands the ins and outs of the real estate business and follows through on her sales from start to finish. She is often praised for her attention to detail in all aspects of a sale.

Working as a full-time professional in the real estate industry for 26 years, JoAnn has continuously been a top sales producer. She attributes her successful sales’ results to the personal relationships that she forges with her clients. Her years of experience combined with her outgoing personality and compassionate nature enable her to understand both the stated and unspoken needs of clients who are buying and selling their homes. JoAnn stays current with changing market conditions and trends in order to provide exceptional service and ensure a timely sale.

Her perseverance and real estate market savvy help her achieve 100% client satisfaction. The relationships that JoAnn forms with clients often last long after the purchase or sale of a home. Her clients’ satisfaction is her top priority and drives her to consistently exceed her performance goals and expand her growing referral base.