A fixed rate mortgage is a loan where the interest rate remains the same for a given period of time (not always 30 years).

Most people think of a fixed loan as a 30 year fixed loan.

This is not always the case.

A loan can be fixed for 6 months, 2 years, 3 years, 5 years, 7 years, 10 years, or other terms. After this initial term, it usually becomes adjustable over the remaining months or years of its loan. It adjusts to a new rate based on a stated formula. There may also be terms on how often it changes, what the maximum size of a change can be over a specific period of time, and the maximum lifetime rate of the loan.

There can also be hybrid features attached to these loans.

For example, there are loans available that:

are fixed for 30 years

offer the option of an interest-only payment for the first 10 years of the loan

feature the protection of a 30 year fixed rate, with the option to make lower payments for the first 10 years

A loan can also:

have a 40 year term

be fixed only for the first 30 years

Generally speaking, the longer a loan is fixed for, the higher the interest rate is. In recent times the difference between short-term and long-term rates has not been that much, so many people have opted for fixing their loans for a longer term.

Drawbacks

Mortgage loans usually are not portable