What is a "fixed-rate mortgage"?

A "fixed-rate mortgage" is characterized by an interest rate that remains constant throughout the entire duration of the loan. This stability in interest payments is a fundamental feature of fixed-rate mortgages, providing borrowers with predictability in their monthly mortgage payments. With a fixed-rate mortgage, borrowers can plan their finances more effectively, as the amount they owe for principal and interest does not fluctuate with changes in market interest rates.

In contrast, mortgages that allow for variable interest payments can be more unpredictable; the monthly payment amount may change over time, which can be a financial strain for some borrowers. Short-term loans with lower interest rates typically do not have the fixed-rate structure, as they often involve adjustments over time. Additionally, loans that do not require a down payment are generally not classified by their interest rate structure, making them distinct from the concept of fixed-rate mortgages. Thus, recognizing the fixed nature of the interest rate in a fixed-rate mortgage is crucial for understanding how it impacts the borrower's financial planning and stability.