What does a fixed-rate mortgage (FRM) ensure for borrowers?

A fixed-rate mortgage (FRM) is designed to provide borrowers with predictable payments over the entire mortgage term. This means that the interest rate remains consistent from the beginning of the loan until it is fully paid off. Consequently, borrowers are able to budget effectively, as their monthly payments will not fluctuate due to changes in market interest rates.

The stability that comes with an FRM is particularly advantageous for long-term financial planning, making it easier for borrowers to anticipate their expenses without the worry of unexpected increases in payment amounts. This predictability is a key feature that distinguishes FRMs from variable rate mortgages, where interest payments might vary based on market conditions.

In contrast, the other options do not accurately reflect the characteristics of a fixed-rate mortgage. For instance, the idea of having fixed interest payments only for the first year does not align with the fundamental nature of an FRM, as its rates are constant throughout the loan term. Similarly, while it can be said that loan terms are constant, they are primarily defined by the borrower's agreement with the lender rather than market conditions, which is a different aspect. Lastly, the notion that FRMs generally come with lower rates compared to variable rate mortgages isn’t universally true as interest rates can fluctuate based on