A mortgage with a fixed interest rate throughout a loan’s term. In this contract, the borrower is not affected by fluctuations in interest rates in respect to the prevailing economic conditions. Fixed-rate mortgage agreements usually attract higher interest rates in comparison to the adjustable rate mortgage. This is typically a good option to choose when interest rates are expected to rise in the future.
Even though fixed-rate mortgage borrowers don’t stand to benefit from any drop in interest rates during the contract period, they still have an option of refinancing the mortgage in order to take advantage of reduced monthly payments and lower rates. However, often times there are additional closing costs when borrowers refinance because they are able to take advantage of lower interest rates. So one possible negative to initially choosing a fixed-rate mortgage is the cost of refinancing, but this could be offset by all of the interest payment savings if you were able to take lock-in lower interest rates. The benefit to remember with a fixed-rate mortgage is that you can plan financially without any speculative worries even when interest rates rise threefold.