Fixed rate loans have an interest rate that remains constant during the entire life of the loan. The monthly payments usually remain the same each month with these types of loans as well.
Mortgages and auto loans are sometimes structured with fixed rates. Fixed rates work best when interest rates are relatively low. This way it doesn’t matter what the economy does, you’re locked in at the low rate.
The longer you have the loan, the more you’ll benefit from having a low fixed interest rate. It’s often a good idea to review existing loans like mortgages from time to time; especially when interest rates drop.
If you’re thinking of re-financing, ask your banker about any fees and charges associated with the process. Also ask at what percentage rate it would be beneficial for you to re-finance. Often a few tenths of a point is not worth it.
However, if there are a couple of points’ difference between current interest rates and your rate, it could be very worth it. You can sometimes re-finance and save tens of thousands of dollars over the life of your mortgage. If rates are high at the time you apply for your loan, you can go with a fixed rate or a variable rate loan and simply re-finance later when rates drop.From Fixed Rate Loans to Banking Information