A fixed rate mortgage is one that allows you to pay a set rate of interest for the life of the loan. This means that your monthly payments for interest and principal stay the same until the loan is fully paid off. Fixed rate mortgages are available for 30 years, 20 years, 15 years and even 10 years. The total amount of interest you will pay on a fixed rate mortgage increases with the term. You may also be able to arrange a 'bi-weekly' mortgage, which shortens the loan by calling for half the monthly payment every two weeks. As there are 52 weeks in a year, 26 payments, (or 13 'months' worth) are made every year.

One major advantage of a fixed rate mortgage is the certainty of knowing your monthly payments will not increase over the life of the loan, even if interest rates rise. This will also save you quite a bit of money in comparison to someone with an adjustable rate mortgage whose interest rate will reflect the market. The downside, of course, is that if interest rates fall below your fixed rate, you won't be able to take advantage of them. You'll be paying more than someone with a adjustable rate mortgage. The only way you will be able to take advantage of a drop in interest rates is to refinance the loan, which may be a costly transaction.

Fixed rate mortgages may appeal to you if you are a financially cautious person. With a fixed rate mortgage, if interest rates rise by 1% and fall by 1% during your loan period, your repayments will more or less balance out.