Fixed-rate mortgage is the type of mortgage loan in which the interest rate remains the same or fixed over the term of the mortgage. Since the interest rate remains the same, the monthly payments remain the same for the entire mortgage term. It is one of the most popular types of mortgages, especially among the Canadians. However, it is usually more expensive or has a higher starting interest than other mortgages such as variable rate mortgage in which the interest rate may change.
Conventional Fixed-rate mortgages provide borrowers with an established interest rate over a set term of typically 15, 20, or 30 years. Nevertheless, fixed-rate mortgage terms from 6 months to 10 years are also available. In a fixed- rate mortgage, the shorter the term over which the borrower pays, the higher the monthly payment and vice versa.Explore Definition
An individual would opt for a fixed-rate mortgage if:
• An individual wants to know what the exact interest cost will be over the term of the mortgage
• An individual is not comfortable with the fluctuating interest rates and wants to protect himself from rising interest rates
• An individual is a first-time homebuyer
• An individual prefers stability and has a preset budget for mortgage
• An individual wants to be mortgage-free faster with accelerated payment options
In a fixed-rate mortgage, flexible payment terms, such as weekly, bi-weekly, semi-monthly and monthly, is available.