Fixed rate
A fixed rate mortgage (FRM)
is a
mortgage
loan where
the interest
rate on the
note remains
the same
through the
term of the
loan, as
opposed to
loans where
the interest
rate may
adjust or
"float."
Other forms
of mortgage
loan include
interest
only
mortgage,
graduated
payment
mortgage,
adjustable
rate
mortgage,
negative
amortization
mortgage,
and balloon
payment
mortgage.
Please note
that each of
the loan
types above
except for a
straight
adjustable
rate
mortgage can
have a
period of
the loan for
which a
fixed rate
may apply. A
Balloon
Payment
mortgage,
for example,
can have a
fixed rate
for the term
of the loan
followed by
the ending
balloon
payment.
Terminology
may differ
from country
to country:
loans for
which the
rate is
fixed for
less than
the life of
the loan may
be called
hybrid
adjustable
rate
mortgages
(in the
United
States).
This payment
amount is
independent
of the
additional
costs on a
home
sometimes
handled in
escrow, such
as property
taxes and
property
insurance.
Consequently,
payments
made by the
borrower may
change over
time with
the changing
escrow
amount, but
the payments
handling the
principal
and interest
on the loan
will remain
the same.
Fixed rate
mortgages
are
characterized
by their
interest
rate
(including
compounding
frequency,
amount of
loan, and
term of the
mortgage).
With these
three
values, the
calculation
of the
monthly
payment can
then be
done.
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