A fixed-rate mortgage is a home loan where the interest rate stays the same for the entire term. This means your payments remain predictable, regardless of changes in the market.
How It Works
When you sign a fixed-rate mortgage, you lock in the interest rate for the chosen term. Even if market rates rise or fall, your rate and payment amount do not change until the term ends.
Benefits
- Stability: Payments are predictable and unaffected by market changes.
- Budgeting ease: Makes financial planning simpler and reduces uncertainty.
- Peace of mind: Protects you from interest rate increases during your term.
Drawbacks
Fixed-rate mortgages may come with slightly higher initial rates compared to variable mortgages. If interest rates drop during your term, you will not benefit from the lower rates unless you break your contract, which often involves penalties.
Final Thoughts
A fixed-rate mortgage is best for borrowers who value stability and want protection from rising interest rates. It provides peace of mind, even if it may cost more when rates are falling.