Fixed Rate Home Loans

By far the most common type of home loan is the fixed rate mortgage.  In fact, well over half of the mortgage loans outstanding are fixed rate in nature, and over three quarters of new home loan applications are fixed rate in nature.  So just what is a fixed rate home loan?

A fixed rate home loan or fixed rate mortgage is one in which the loan interest rate remains the same for the entire life of the loan as opposed to home loans that adjust or float with prevailing rates tied to an interest rate index.  Fixed rate home loans offer a guaranteed monthly mortgage payment which is one of their biggest advantages, whereas other home loans may adjust or change monthly payments over time.

The interest rate for a fixed rate home loan may be slightly higher because the lender has greater long term home loan risk (if interest rates rise the loan is worth less - similar to a long term government bond).  However if your priority is consistency and stability in your monthly home loan payment and you plan on being in your home for 10 years or more, you should strongly consider a fixed rate home loan.

If you’re considering a fixed rate home loan, use our fixed rate home loan calculator to determine your payment schedule.  You’ll be able to amortize your home loan payments over a fixed period of time at a fixed interest rate and plan your finances accordingly.

Many loans may have a period where they provide a fixed rate of interest.  For example a 5 year balloon loan or a 5/1 ARM (Adjustable Rate Mortgage) has fixed payments and a fixed home loan interest rate for 5 years after which the loan interest rate may adjust up or down, causing your mortgage payment to increase or decrease.