Fixed rate mortgages (FRMs) are home loans with interest rates that do not change for the entirety of the loan. This differs with loans and mortgages that have variable interest rates that float. Mortgage rates often trade inline with the LIBOR rate. There are many different types of mortgages, including graduated patment, adjustable rate, negative amortization, jumbo, balloon payment, and reverse. Some of these types of loans listed may actually have periods of fixed interest rates, but the only mortgage that has a fixed interest rate for the entire term of the loan is the fixed mortgage.

If you have a home loan for $500,000 and a fixedinterest rate of 5.0% for 30 years, the principal is P = 500000, the monthly interest rate is r = 6 / 100 / 12, the number of monthly payments is N = 30 * 12 = 360, the fixed monthly payment equals $2,997.75.

Fixed rate mortgages are traditionally the most important type of home loan in the United States. You generally only hear about the 30 year fixed rate mortgages, along with the 15, but shorter and longer loan periods do exist including, and 40-year and 50-year mortgages. Internationally, fixed rate mortgages are less popular, and in some cases, do not exist. The nice part about fixed rate mortgages is that the home owner is protected against upside interst rate risk, but also can still refinance to take advantage of downward moves in interest rates.