What Is a Fixed-Rate Mortgage? Pros, Cons, and How They Work

Buying a house is a major financial decision, which can sometimes lead to stress and uncertainty. With a fixed-rate mortgage, you can introduce some predictability into the process. By knowing what your mortgage payments will look like for the next 15 or 30 years, you can focus on other financial goals.

But fixed-rate mortgages aren’t right for everyone, and it’s important to know how they compare to adjustable-rate mortgages (ARMs). Below, we’ll look at what fixed-rate mortgages are, their pros and cons, and how to decide between 15- and 30-year fixed-rate mortgages.

What is a fixed-rate mortgage?

A fixed-rate mortgage is a home loan where the interest rate stays the same for the term of that loan. Fixed-rate mortgages are usually for 15 or 30 years, although other term lengths are available. Because your interest rate stays constant, you’ll be protected against fluctuations in the market. That means you’ll always make the same monthly mortgage payments.

Current market rates and trends

As of July 31, 2025,, the interest rate for 30-year fixed-rate mortgages is 6.75%.[1] For 15-year fixed-rate mortgages, it’s 6.03%.[2] These are relatively high compared to interest rates of the last decade.

Unfortunately, many analysts expect mortgage rates to stay between 6% and 7% over the next two years.[3] Fannie Mae is predicting 30-year rates to dip slightly to 6.2% by 2026, with Wells Fargo predicting a smaller decline to 6.51%.

Fixed-rate vs. adjustable-rate mortgages

Deciding between a fixed-rate and adjustable rate mortgage is one of the most important decisions you can make when buying a home. While fixed rates offer predictability, adjustable rates can save you money on interest rates—at least, at first. Here are the pros and cons of fixed-rate vs. adjustable-rate mortgages.

Pros and cons of fixed rates

The biggest advantage of fixed-rate mortgages is that they’re very predictable. By locking in your interest rate, you’ll know exactly how much you’ll spend on your mortgage each month for the entire term of the loan. That predictability means you’ll be protected from fluctuations in the market, and you won’t see your mortgage payments rise when interest rates increase.

Because of this predictability, fixed-rate mortgages are ideal for long-term financial planning. Housing costs are significant, so being able to project them years into the future makes it much easier to plan for financial goals and major life events. For example, you can easily calculate how much house you can afford on your salary when you know your mortgage payments won’t change.

However, that predictability comes at a cost. Fixed-rate mortgages have higher interest rates than ARMs at first. While you’ll be shielded from increases in interest rates—which only affect adjustable-rate mortgages—you’ll have to pay more for your mortgage initially.

Plus, there’s no guarantee that interest rates will go up. And if interest rates go down, you’ll have missed out on lower mortgage payments. While you can refinance your mortgage to take advantage of lower interest rates, doing so involves costs and meeting qualification requirements.

Pros and cons of adjustable rates

Adjustable-rate mortgages are cheaper than fixed-rate mortgages, at least initially. Interest rates on ARMs are often up to 0.5-1.5 percentage points lower than fixed-rate mortgages. As a result, you’ll enjoy lower monthly mortgage payments, which can free up your spending. Plus, adjustable-rate mortgages also benefit if interest rates go down.

The lower rates mean they’re sometimes more suitable for buyers who expect to move again within a couple years, such as military families, young professionals, or those going through a recent divorce. Since these buyers will likely be applying for new mortgages soon anyway, taking advantage of lower interest rates may make more sense.

However, adjustable-rate mortgages are inherently unpredictable and expose borrowers to significant risks. If interest rates rise, then you’ll suddenly find yourself paying more in monthly mortgage payments, to the point where you may not be able to afford your home anymore. While some ARMs have rate caps that limit increases, the higher payments can consume a significant portion of your budget over time.

Trying to predict the direction of the housing market is notoriously difficult. Say you buy in an area with rapidly increasing property values to offset the risks of higher interest rates. Unforeseen events can still happen, making your mortgage more expensive while undercutting the value of your new home.

For example, Ken Lewis bought a condo in St. Louis, thinking the area would see appreciating values. “The downtown area was supposed to be ‘up-and-coming,’ but COVID caused a wave of business closures and petty crime, which hurt property values,” he said. “We ended up sitting on the market from November through January—so we paid three extra mortgage payments.”

This instability makes long-term financial planning especially difficult with ARMs. You’ll need to plan for multiple scenarios, and you’ll need enough of a financial cushion to make sure you can make payments if interest rates rise. Plus, ARMs tend to be more complex than fixed-rate mortgages and often include adjustment periods, caps, and indexes that can make them confusing for borrowers.

30-year vs. 15-year fixed mortgages

If you choose a fixed-rate mortgage, you’ll also need to decide whether to opt for a 30-year or 15-year term. While other term lengths are available, these are two of the most common. Each term length has its own advantages and drawbacks, so the choice will largely depend on your financial situation and goals.

The main advantage of a 30-year fixed mortgage is that your monthly mortgage payments will be much smaller, since you have twice as long to pay off the debt. In fact, monthly payments for 15-year mortgages can be as much as 40–50% higher than for 30-year mortgages. If you’re able to make a down payment of at least 20%, you can further decrease your mortgage payment by avoiding PMI.

With such a dramatic difference in monthly payments, you may wonder, ”Why is a 15-year fixed-rate mortgage better than a 30-year in some cases?” Well, a 15-year mortgage can save you a significant amount of money in terms of interest. For example, with a 6.5% interest rate on a $400,000 mortgage, you’d pay $228,000 in interest on a 15-year term but $510,000 on a 30-year term.

But even if you’re looking to save on interest, keeping up with the larger payments of a 15-year mortgage can be stressful. There are other options, such as making two extra mortgage payments a year on a 30-year loan, which can save you a substantial sum of money over time while still being more manageable.

How to use fixed-rate mortgages in your buying strategy

A fixed-rate mortgage can be an important part of your home-buying strategy. Timing your purchase well is particularly useful. While it’s impossible to perfectly time the market, you can have a general idea of whether current rates are low and if they’re likely to increase in the next few years. Ideally, you’ll want to lock in a fixed-rate mortgage when interest rates are low.

While interest rates aren’t expected to move by much over the next couple years, they’re also relatively high, so there’s somewhat less pressure to lock in a good rate. If you want to get a better interest rate, you can use today’s high-rate environment to focus on improving your credit score before buying a house. Paying down debts, reducing your credit utilization, and correcting credit report errors will help you qualify for lower-rate mortgages.

Also, when calculating what your monthly mortgage payments will be with a fixed-rate mortgage, consider the entire cost of home ownership. You’ll want a mortgage rate that allows you to set aside money for other expenses, such as repairs, home improvements, and an emergency fund. This strategy will give you the most financial flexibility while still enabling you to build equity.

Clever can help you save money by connecting you with lenders and real estate agents in your area. By comparing multiple top local realtors, you’ll be able to get an expert on your side who can help you throughout the homebuying process. Plus, with cash back, you can pocket even more money for yourself.