GLOSSARY — REAL ESTATE TERMS
Fixed-Rate Mortgage
A fixed-rate mortgage locks in the same interest rate for the entire loan term, keeping principal and interest payments identical every month regardless of how market rates move afterward.
How the rate stays locked
Once a fixed-rate mortgage closes, the interest rate never changes for the life of the loan -- whether market rates rise or fall over the following 15 or 30 years, the borrower's rate and principal-and-interest payment stay the same.
30-year vs. 15-year terms
A 30-year fixed loan offers a lower monthly payment spread over more time, while a 15-year fixed loan carries a higher monthly payment but builds equity faster and typically comes with a lower interest rate. Unlike an adjustable-rate mortgage, there's no future rate uncertainty with either term.
WHAT TO ASK WHEN CHOOSING A FIXED-RATE TERM
- Compare monthly payment and total interest cost between 30-year and 15-year terms
- Confirm there's no prepayment penalty if you plan to pay extra principal
- Ask your lender for the rate difference between the two term lengths
- Decide based on your actual monthly budget, not just the lowest possible rate
Is a fixed-rate mortgage always better than an ARM?
Not automatically -- it depends on how long you plan to keep the loan and your tolerance for future rate uncertainty. A fixed rate offers predictability; an ARM can offer short-term savings.
Can I pay off a fixed-rate mortgage early?
Most fixed-rate mortgages allow extra principal payments or early payoff without penalty, though it's worth confirming your specific loan doesn't include a prepayment penalty.
Does refinancing let me switch from an ARM to a fixed rate later?
Yes -- this is a common strategy for buyers who started with an ARM and want to lock in a fixed rate once their financial picture or the rate environment changes.