What happens to the interest rate in a fixed-rate mortgage?

What happens to the interest rate in a fixed-rate mortgage?

• A. It varies with the market.
• B. It is adjusted annually.
• C. It remains the same throughout the loan term.
• D. It decreases as the principal is paid down.

Answer: (C)

In a fixed-rate mortgage, the interest rate remains the same throughout the entire loan term. This means that borrowers have a predictable payment schedule, as their monthly mortgage payments will not change, making budgeting easier and providing stability. The fixed interest rate protects borrowers from market fluctuations; regardless of changes in interest rates over time, their rate stays constant. This is particularly advantageous in a rising interest rate environment, as it ensures that the borrower will not face higher payments than initially agreed upon.

In a fixed-rate mortgage, the interest rate remains the same throughout the entire loan term. This means that borrowers have a predictable payment schedule, as their monthly mortgage payments will not change, making budgeting easier and providing stability. The fixed interest rate protects borrowers from market fluctuations; regardless of changes in interest rates over time, their rate stays constant. This is particularly advantageous in a rising interest rate environment, as it ensures that the borrower will not face higher payments than initially agreed upon.