Fixed-Rate Mortgage

Updated 2026-05-18

A Fixed-Rate Mortgage is a type of Mortgage loan where the Interest Rate remains constant for the entire duration of the loan term. This provides borrowers with predictable monthly principal and interest payments, making budgeting easier and protecting them from potential interest rate increases in the market.

Key Characteristics

• Stable Interest Rate: The interest rate is locked in at the time of closing and does not change, regardless of market fluctuations.
• Predictable Payments: Monthly principal and interest payments remain the same throughout the loan term.
• Common Terms: Fixed-rate mortgages are commonly offered with 15-year, 20-year, or 30-year terms, though other durations exist.

Benefits and Drawbacks

Benefits:

• Budget Stability: Borrowers know exactly what their principal and interest payment will be each month, simplifying financial planning.
• Protection from Rate Hikes: If market interest rates rise, the borrower's payment remains unchanged.
• Simplicity: Easier to understand and manage compared to Adjustable-Rate Mortgage (ARM) (ARMs).

Drawbacks:

• Higher Initial Rates: Fixed-rate mortgages often have slightly higher initial interest rates than ARMs during periods of low interest rates.
• Missed Opportunity for Rate Drops: If market interest rates fall significantly, the borrower's rate remains fixed, and they would need to Fannie Mae to Fannie Mae Refinance to take advantage of lower rates.

Refinancing to a Fixed-Rate Mortgage

Borrowers with Adjustable-Rate Mortgage (ARM)s (ARMs) often choose to refinance into a fixed-rate mortgage to gain payment stability. This can be done through a Rate and Term Refinance. The Fannie Mae to Fannie Mae Refinance (IRRRL) for VA Loan Entitlement, Certificate of Eligibility (COE), and Loan Guaranty Certificate (LGC) is a specific program that allows for the conversion of an ARM to a fixed-rate mortgage, even if the new fixed rate is not lower than the ARM's current rate.