What type of mortgage has an unchanging interest rate throughout the loan term?

A fixed-rate mortgage maintains a constant interest rate for the entire duration of the loan, which offers stability and predictability in monthly payments. Borrowers choose fixed-rate mortgages to lock in their interest rate, ensuring that their mortgage payment will not fluctuate due to changes in market rates. This consistency makes it easier for homeowners to budget, as they can anticipate their monthly expenses without concern for rising interest costs.

In contrast, adjustable-rate mortgages have interest rates that can change at specified intervals, typically based on a financial index, which can lead to varying monthly payments. Balloon mortgages involve lower initial payments that can substantially increase later on, often resulting in a large final payment that may require refinancing. Subprime mortgages usually target borrowers with lower credit scores and may come with higher interest rates and less favorable terms, rather than focusing on the stability of rates over time.

Thus, the fixed-rate mortgage is ideal for those seeking a stable financial commitment over the life of the loan.