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A fixed-rate mortgage is a long-term loan that you use to finance a real estate purchase, typically a home.
Your borrowing costs and monthly payments remain the same for the term of the loan, no matter what happens to market interest rates.
This predetermined expense is one of a fixed-rate loan's most attractive features, since you always know exactly what your mortgage will cost you.
If interest rates rise, a fixed-rate mortgage works in your favor. But if market rates drop, you have to refinance to get a lower rate and reduce your mortgage costs.
Typical terms for a fixed-rate mortgage are 15, 20, or 30 years, though you may be able to arrange a different length. With a hybrid mortgage, which begins as a fixed-rate loan and converts to an adjustable rate, the fixed-term portion is often seven or ten years.
See fixed-rate loan.
Fixed-Rate Mortgage (FRM)
A mortgage on which the interest rate and the monthly mortgage payment remain unchanged throughout the life of the mortgage.