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A fixed-rate mortgage, or FRM, has a fixed interest rate over the duration of the loan. In contrast, the mortgage with a changing interest rate is called an adjustable-rate mortgage, or ARM. The ARM will generally have a lower interest rate than a similar fixed-rate mortgage because the fixed-rate mortgage lacks interest rate risk. The term fixed-rate mortgage is often confused with the term conventional mortgage. Unlike a conventional mortgage, the fixed-rate mortgage does not have to be fully amortizing though this is usually the case. A fixed rate mortgage can even be a balloon loan. Both the terms fixed-rate mortgage and conventional mortgage are also further confused with the term conforming mortgage. The fixed-rate mortgage can be but is not necessarily conforming. |
