Every day banks and other lenders create tables of the prices for their various mortgage products. For some lenders, this can be pages of information listing hundreds of individual terms and mortgage rates. These rate tables are then sent to brokers and other interested parties.
Most of the information on those sheets pertains to adjustable rate , hybrid, and other special types of mortgages. The most popular mortgages, the fixed rate ones, don’t usually require as much space. This is due to the simplicity of these basic loans. Since a fixed mortgage only uses one interest rate, it is much easier to calculate and has simple terms, when compared to other mortgages.
A fixed rate mortgage will lock the interest rate of the loan the day that the initial application is submitted to the lender. That rate will be applied for the entire life of the mortgage, whether it is five years or thirty years. Lenders, brokers, and even the applicant can use a Mortgage Calculator to see what the monthly payment will be on the loan. This isn’t possible with other types of loans because there is no way to know what the interest rate will be in five or ten years, let alone by the end of a twenty or thirty year ARM.
Interest rates on fixed mortgages tend to a bit higher, since the bank is assuming a larger risk with regards to making a profit on the transaction. However, most borrowers are willing to take that higher rate, since they know it will never change. They prefer the certainty of fixed monthly payments and knowing at the start how much their total mortgage will cost to the uncertainties associated with other types of mortgages.