Fixed-Rate Loans

Question 1

What is a fixed rate loan?

Answer 1

A fixed-rate mortgage is a fully amortizing mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or “float”.

Question 2

What are the factors that determine the borrower’s interest rate?

Answer 2

• Loan default rate in the current market
• Early loan payoff
• Loan fraud
• Foreclosures
• The lender’s margin
• The mortgage-backed securities market

Question 3

What are interest rates indirectly affected by?

Answer 3

• Economic indicators, such as the gross domestic product

- Actions taken by the Federal Reserve

Question 4

Can a lender increase a borrower’s rate if they make a late mortgage payment?

Answer 4

A lender may not increase the borrower’s rate simply because he or she is late making the mortgage payment, though a late fee may apply.