Fixed Rate Mortgage

Fixed Rate Mortgage

· A fixed rate mortgage (FRM) is a mortgage loan where the interest rate on the promissory note remains the same through the term of the loan.
· The term of the home mortgage can be 10, 15, 20 or the popular 30 year fixed rate mortgage term
· The benefit of a fixed-rate mortgage is that the homeowner will not have to contend with varying loan payment amounts that fluctuate with interest rate movements.
· The main disadvantage in fixed-rate mortgage is , Interest rate stays the same even if interest rates go down .
· For example, for a home loan of $150,000 with a fixed yearly nominal interest rate of 6.5% for 30 years, the principal is $150,000, the monthly interest rate is 6.5 %, the mortgage monthly payment is $948.10. If the mortgage interest rate is 8.50%, the mortgage monthly payment would amount to $1,153.37. The difference in monthly payments is $205.27.