Fixed Rate Mortgage (FRM)

It is also referred as fixed mortgage. A fixed-rate mortgage is constant for the length of the loan, usually 30 years. Shorter term fixed-rates, typically 15- or 20-years, carry lower interest rates, higher payments and less money paid out than with a longer-term loan mortgage loans. Longer term fixed-rates have smaller monthly payments and are easier to budget than shorter term mortgage loans.

If you have a fixed rate loan and the interest rate drops significantly, you may want to refinance. Experts are in agreement that refinancing is a smart move if you can get an interest rate that is 2 points less than your current rate and you plan to remain in the house for at least 18 more months (to recover costs associated with refinancing).

Advantages: You are guaranteed that your rate will be exactly the same every month for the duration of the fixed rate term – even if other interest rates rise during this period. You can confidently plan your budget for the whole period, because you will know in advance exactly what your major outgoings will be.