Fixed-rate mortgage
Also called: 30 year fixed, 15 year fixed
A mortgage whose interest rate never changes, so principal and interest stay the same for the full term.
The note rate is locked for the life of the loan. A shorter term generally carries a lower rate and much less total interest, at the cost of a higher required monthly payment; a longer term does the reverse.
Fixed rate fixes principal and interest only. Taxes, insurance, HOA dues, and mortgage insurance can all still move, so the total payment is not frozen.
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Related terms
- ARM (Adjustable-Rate Mortgage)A mortgage whose interest rate is fixed for an initial period and then adjusts on a set schedule against an index.
- AmortizationThe schedule that splits each mortgage payment between interest and principal over the life of the loan.
- Escrow account (impounds)An account your servicer uses to collect and pay your property taxes and homeowners insurance alongside the mortgage payment.
- PITIPrincipal, Interest, Taxes and Insurance, the four parts of a typical monthly mortgage payment.
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