Fixed-Rate Mortgages: What They Are and When to Apply

Although there are numerous mortgage products on the market, they can be divided into two broad categories: variable-rate loans and fixed-rate loans. This article will deepen our understanding of fixed-rate mortgages and when to apply for this type of mortgage loan.

What is a Fixed-Rate Mortgage?

A “fixed-rate mortgage” is a home loan with an interest rate that remains the same for the entire term. This means that the mortgage has a fixed interest rate from the commencement of payment until it is completely paid. People who prefer fixed-rate mortgages want to know how much they’ll have to pay each month. 

To understand a fixed-rate loan, you should know these mortgage loan definitions:

  • Loan amount – Your loan amount is the sum you are borrowing.
  • Annual percentage rate – The rate at which you pay interest every year is the annual percentage rate.
  • Term – A mortgage’s term is the total time over which you plan to pay the total loan.
  • Amortization – Amortization is the timetable that your payments are based on. This is typically the same as your loan term, but it may be longer if you have a balloon mortgage, which requires a lump-sum payment at the end of the term.
  • Payment frequency – The frequency of payment is the interval between every payment—usually monthly.
  • Payment amount – Payment amount is the required monthly or quarterly payment.

How Fixed-Rate Mortgages Work

A home loan application is the first step in obtaining a fixed-rate mortgage. There are four basic steps to the process:

Step 1: Select a mortgage broker. With their help, you’ll be able to search for the most suitable loan and complete an application.

Step 2: Inform the lender that you prefer a fixed-rate loan. Your broker will search for the best loan for your specific needs. If you have a preference for a fixed rate, let them know so they search only for these loans.

Step 3: Check the requirements. Every loan comes with a specific set of requirements, and you’ll have to see whether they are to your liking. If you qualify for the loan, you will then be offered a loan term—typically of 15 or 30 years.

Step 4: Consider the rate offered. The more you put down on the property, the less loan capital you’ll have and the better interest rate you’ll be offered. Buyers with limited capital may be subject to higher rates.

You’ll start making monthly payments on your loan as soon as it is approved. A portion of each payment will cover interest accrued between payments, and the remainder will go toward mortgage principal. 

A fully-amortized loan means you will not be obliged to make a lump-sum, or balloon, payment at the end of the period. Additionally, you are not required to make an extra payment, you will know when the loan will be paid off and how much interest you will pay during the duration.

The extra money will be put into the principal balance of your loan if you make more than the minimum payment each month. Notify your service provider that the extra funds should be applied to your principal. You can also consider making exra payments, which may enable you to pay off your loan sooner than the period indicates.

When to Use a Fixed-Rate Mortgage

When it comes to loans, a fixed-rate loan may be your best option when:

  • You don’t want to have to deal with refinancing later on.
  • You would like to lock in a low-interest rate.
  • You prefer knowing the interest you’ll have to pay over the course of your loan.

A fixed-rate loan, on the other hand, is not always the best choice. If you have poor credit or a little down payment, you may be unable to obtain a fixed-rate mortgage. If a fixed-rate mortgage is not an option for you, or if you are eligible for higher but adjustable-rate loans, you may wish to consider another type of mortgage.


Fix-rate mortgages have both pros and cons. The interest rate environment usually causes these risks. A fixed-rate mortgage reduces the borrower’s risk while increasing the lender’s. The opposite is true when interest rates are declining. Borrowers pay more than the market would have them. Fixed-rate mortgages make lenders more money than they would otherwise.

Borrowers can, of course, refinance their fixed-rate mortgages at current rates if they are lower, but they will incur significant fees.

Whether you’re buying a home, refinancing, or using your home equity, Hawkins Home Loans is your online option for fixed- and adjustable-rate loans alike, astonishingly low rates, and excellent service in Sacramento. We would love to hear from you!