Fixed rate loan defined

Writer and editor - Bryan Robinson | Updated on 2023-01-11

What is a fixed ate loan?

The terms “fixed rate” and “adjustable rate” can be confusing to some homebuyers. A fixed rate mortgage means that your monthly payments will stay the same for the entire term of your loan, whether it’s 30 years, 20 years, or 15 years. An adjustable rate mortgage, on the other hand, means that your interest rate and monthly payments could change over time.

What are the benefits of a fixed rate loan?

Fixed rate loans offer borrowers the stability of knowing what their monthly loan payments will be for the life of the loan. This can be helpful in budgeting and makes it easier to predict your long-term financial picture. Additionally, if interest rates rise during the life of your loan, you will still benefit from the lower fixed rate.

Check out APR page.

What are the drawbacks of a fixed rate loan?

There are a few potential drawbacks to taking out a fixed-rate loan. First, if interest rates have dropped since you took out your loan, you may be regretting not locking in a lower rate. Also, if you need to sell your home or refinance before the end of your loan term, you may not be able to get out of your loan without paying a hefty prepayment penalty.

Bryan Robinson

Bryan Robinson
Writer and editor

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