Fixed-Rate Mortgage
A fixed-rate mortgage locks your interest rate for the entire loan term — your principal and interest payment never changes. Learn how fixed-rate loans are priced, how they compare to ARMs at current rates, and when to choose one.
Definition
A fixed-rate mortgage is a home loan where the interest rate is set at closing and never changes for the life of the loan. Your principal and interest payment is identical every month — from the first payment to the last.
Fixed-rate terms compared
Estimated rates at the time of publication for a $400,000 loan, 20% down, 760+ credit score:
| Term | Rate range | Monthly P&I ($400K) | Best for |
|---|---|---|---|
| 30-year fixed | 6.75–7.50% | $2,613–$2,796 | Maximum payment stability; long-term holders |
| 20-year fixed | 6.50–7.25% | $2,984–$3,160 | Faster payoff with lower rate than 15-yr |
| 15-year fixed | 6.00–6.75% | $3,375–$3,543 | Lowest total interest; strong cash flow |
| 10-year fixed | 5.75–6.50% | $4,340–$4,516 | Near-payoff refinances; very high income |
How fixed-rate pricing works
Your rate at closing is built from three layers:
- The 10-year Treasury yield — the benchmark. When the 10-year rises, fixed mortgage rates rise. Watch US Treasury daily yield rates as a leading indicator.
- The mortgage spread — the premium above Treasuries investors demand for prepayment risk (the risk that you refinance when rates fall). The spread has run 2.3–2.8 percentage points since 2023, above the historical average of 1.7 points.
- Lender margin — the lender's cost of origination, servicing overhead, and competitive positioning. Shopping 3+ lenders on the same day can surface differences of 0.25–0.5 percentage points for an identical borrower profile.
Fixed vs adjustable rate at current rates
Fixed rate wins when…
- You plan to hold the loan 7+ years
- Rates are near historical highs (unlikely to go much higher)
- You prioritize payment predictability for budgeting
- You have a tight DTI and cannot absorb a payment increase
ARM may win when…
- You plan to sell or refinance within 5–7 years
- Rates are expected to fall before the adjustment period
- The initial rate discount is 1%+ (enough to matter)
- You have income flexibility to absorb a higher payment if needed
Common questions
How is a fixed mortgage rate set?
Fixed mortgage rates are priced primarily off the 10-year US Treasury yield, plus a spread that compensates mortgage investors for prepayment risk and credit risk. The spread has historically averaged 1.7 percentage points but widened to 2.3–2.8 points in 2023–2026 due to Federal Reserve quantitative tightening and volatile prepayment expectations. Lenders also layer in their own margin, cost of capital, and competitive positioning. The Freddie Mac Primary Mortgage Market Survey (PMMS) publishes the weekly national average.
What is the difference between a 15-year and 30-year fixed rate?
15-year fixed rates are typically 0.5–0.75 percentage points lower than 30-year rates because the shorter term reduces the lender's interest rate risk and prepayment exposure. The tradeoff: 15-year monthly payments are 30–40% higher. On a $400,000 loan at 7.25% (30-yr) vs 6.5% (15-yr), the monthly P&I difference is about $660/month — but the 15-year saves over $220,000 in total interest over the life of the loan.
Should I choose a fixed or adjustable rate in 2026?
At 7%+ fixed rates, ARMs (adjustable-rate mortgages) offer an initial discount of 0.5–1.5%, but that discount disappears when the loan adjusts. If you plan to hold 7+ years, a fixed rate eliminates repricing risk. If you plan to sell or refinance within 5–7 years, the ARM's lower initial rate may save money before any adjustment occurs. See the comparison in our variable vs fixed rate 2026 analysis.
Can I lock a fixed rate before I find a house?
A standard rate lock requires a property address and a signed purchase contract. However, some lenders offer a "float-down" pre-lock or an extended rate lock (60–120 days) for buyers who are under contract but have a longer closing timeline. Float-down locks allow you to capture a lower rate if rates fall during the lock period, for a fee (typically 0.25–0.5% of loan amount). Extended locks carry a premium of 0.1–0.25% for each additional 30 days.
What happens to my fixed rate if I refinance?
A refinance replaces your existing mortgage with a new loan at the current market rate. Your original fixed rate is extinguished and you start a new amortization schedule. If rates have fallen, a refinance can lower your payment — but you restart the interest-heavy early years of amortization. The general rule of thumb: refinancing makes sense if the new rate is at least 0.75–1 percentage point lower than your current rate and you plan to stay long enough to recover the closing costs (typically 2–4% of the loan amount).