What Does Fixed Term Mean?

 

Describes an investment vehicle, usually some kind of debt instrument, that has a fixed time period of investment. With a fixed-term investment, the investor parts with his or her money for a specified period of time and is repaid his or her principal investment only the end of the investment period.


A mortgage that has a fixed interest rate for the entire term of the loan is called fixed-rate mortgage. The distinguishing factor of a fixed-rate mortgage is that the interest rate over every time period of the mortgage is known at the time the mortgage is originated. The benefit of a fixed-rate mortgage is that the homeowner will not have to contend with varying loan payment amounts that fluctuate with interest rate movements.

Fixed term mortgage is a type of mortgage that has a fixed duration of time. A Mortgage is a loan taken for the purchase of real estate, and is secured by the property being purchased with the amount. That is, the property being bought with the loan serves as collateral for the loan. Mortgages are of different types with open or fixed terms, fixed or variable interest rates. Most fixed term mortgages permit the payment of a fixed interest rate during the term chosen by the customer, which could be ten, fifteen years or more. Also in most instances fixed term mortgages are provided at a rate of interest lower than open term mortgages. In case the mortgage is being paid before the stipulated time, an interest penalty is charged.

A fixed term mortgage is just another name for a fixed rate loan since both have identical features and are actually quite flexible in terms of repayment. Both are the reverse of open term loans or variable rate mortgages in which interest rates fluctuate as per the market.

While the interest rates of fixed term mortgages remain the same throughout the stipulated tenure, the interest rate varies from company to company, or bank to bank. Hence, people opting for fixed term mortgages shop around to get the lowest possible interest rate. Despite their name, they are not rigid, and offer flexibility of down payments and other payment options.