Fixed-rate mortgage definition
A fixed-rate mortgage is a home loan with an interest rate that stays the same. Most mortgages are fixed-rate loans.
The main benefit of fixed-rate mortgages is that they have relatively predictable payments. Each month's principal and interest payment is the same amount, for as long as you have the loan.
How fixed-rate mortgages work
A fixed-rate mortgage is fully amortizing, meaning that the principal and interest that you owe your lender are fully paid off when the loan ends. Part of each monthly payment repays some interest. The rest pays down the amount you owe.
In a fixed-rate mortgage’s early years, most of the payment goes to interest; eventually, most goes to principal. This simplicity contrasts with the complexity of an adjustable-rate mortgage, or ARM, which features a changeable interest rate and many variations on loan terms and payments.
Common fixed-rate mortgage terms
A loan's term is the length of time you have to repay the principal and interest by making equal monthly payments. As you shop for a fixed-rate mortgage, you might see these terms:
30-year: This is likely the longest mortgage term you will encounter. It's the most common term for a fixed-rate purchase mortgage. For a given loan amount, a 30-year term gives the lowest monthly payments. Compare 30-year fixed mortgage rates.
15-year: Most mortgage lenders offer a 15-year term. Compared to a 30-year mortgage of the same amount, a 15-year loan has higher monthly payments, but lower interest charges over the life of the loan. A 15-year loan usually has a lower interest rate. Compare 15-year fixed mortgage rates.
Depending on the lender, you might also encounter fixed-rate mortgages with these terms:
20-year: Some lenders offer 20-year fixed mortgages. For a given loan amount, the monthly payments are more affordable than on a 15-year mortgage and less affordable than on a 30-year mortgage. Compare 20-year fixed mortgage rates.
10-year: A 10-year fixed-rate mortgage is for the borrower who wants to pay off the loan fast and can afford higher monthly payments. Compare 10-year fixed mortgage rates.
Frequently asked questions