Fixed-rate mortgage.
In plain English
A fixed-rate mortgage locks in your interest rate for the life of the loan. Whether it's 30 years, 20 years, or 15 years, the rate doesn't change. Your principal-and-interest payment stays the same every month for the entire term. The 30-year fixed is the most common mortgage product in the U.S.; the 15-year fixed has higher monthly payments but a lower interest rate and dramatically less total interest over the life of the loan.
01Why it matters
A fixed-rate mortgage is predictable. You know exactly what your principal-and-interest payment will be for the next 30 years (escrow for taxes and insurance can still change). That predictability is valuable when interest rates are low and expected to rise. It's the more conservative choice and makes long-term budgeting straightforward.
02The math, step by step
$300,000, 30-year fixed at 6.5%: monthly principal + interest is $1,896. Total interest paid over 30 years: $382,633. Same loan as a 15-year fixed at 6.0%: monthly principal + interest is $2,531 (more per month), but total interest paid is only $155,683. The 15-year saves about $227,000 in interest over the life of the loan, in exchange for $635 more per month.
Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.
03What this is NOT
A fixed-rate mortgage's rate never changes. An ARM has a fixed period (usually 5, 7, or 10 years) and then adjusts periodically based on a market index. Fixed = predictable, sometimes slightly higher initial rate. ARM = lower initial rate, future rate uncertainty.
Plain-English answers from our glossary. Receipts included. Never advice.
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