fixed rate mortgage
A mortgage with an interest rate that remains constant throughout the loan term, providing predictable monthly payments regardless of market rate changes.
Example
“The 30-year fixed rate mortgage at 6.5% guaranteed the same $2,528 monthly payment for three decades.”
Memory Tip
FIXED rate mortgage = payment never changes. Predictable, stable. Good when rates are low.
Why It Matters
Fixed rate mortgages provide financial stability and peace of mind because borrowers know exactly what their monthly payment will be for the entire loan term. This predictability makes budgeting easier and protects you from rising interest rates that could dramatically increase your payment if you had a variable rate mortgage instead.
Common Misconception
Many people mistakenly believe that a fixed rate mortgage means the total amount owed never changes, when in reality only the interest rate stays constant. The principal balance decreases with each payment, but the interest portion and principal portion of your monthly payment remain proportional throughout the loan term.
In Practice
If you take out a 30-year fixed rate mortgage for $300,000 at 6 percent interest, your monthly payment will be approximately $1,799 every single month for 360 payments. Even if interest rates rise to 8 percent the next year, your payment stays at $1,799, whereas someone with a variable rate mortgage might see their payment jump to $2,200 or higher when rates reset.
Etymology
FIXED (unchanging, set) RATE (interest percentage) MORTGAGE. A mortgage with a FIXED interest RATE.
Common Misspellings
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