ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Fixed Rate Mortgages Explained– and Calculate Fixed Rate Mortgages (FRM) Using Excel

Updated on March 27, 2011

Interest Rate on the Loan Remains the Same

Fixed rate mortgage (FRM) is a very common mortgage loan where the interest rate on the loan remains the same throughout the term of the loan. This is different from adjustable rate mortgage where the interest rate is adjusted based on market forces prevailing at any one given time. Fixed-rate mortgages have been used by many homeowners for several decades.  Fixed-rate mortgages offers security from the risks of escalating interest rates in the unknown future. Fixed rate mortgages are normally packaged in such a way that monthly rates that are not paid for in time are charged a compounding interest.

Reducing Interest Amounts

In a Fixed rate mortgage (FRM), you are given a fixed monthly payment of the borrowed money plus the accrued interest for the month. Initially when the principal balance is high, the interest amount is equally high but as you progresses towards the end, the principal balances reduces and interest amount is correspondingly small.

Many HomeBuyers Interested In Fixed-Rate Mortgages
Many HomeBuyers Interested In Fixed-Rate Mortgages

Example of a Fixed Rate Mortgage Payment

Let’s take an example: You borrow a fixed interest mortgage loan of $150,000 to be paid in a term of 15 years at a fixed interest rate of 6% per year. The fixed monthly payment of the principal is $150,000 divided by number of months in 15 years which is equal to 150,000/180 equals to $833.30 per month. Then there is the fixed monthly interest which is 6% divided by number of months per years which is equal to 6/12% equals to 0.5% per month. The value 0.5% can be expressed as a factor by dividing by 100 which is equal to 0.005. This means the interest payable for the first month on the principal balance of $150,000 is 150,000 x 0.005 equals to $750.

Total Monthly Payment Reduces With Time

In the second month, the principal balance will be 150,000 minus 833.30 equals to $149,167.3. The fixed monthly payment of the principal will remain the same as $833.30 but the interest will be $149,167.3 x 0.005 equals to $745.84. As you can see, the total monthly payment for the first month is 833.30 + 750 = 1583.30. The total monthly payment for the second month is 833.30 + 745.84 = 1579.14. This shows that the total monthly payment reduces with time due to reducing monthly interest amounts.

You should be able to see that the fixed monthly payment on a fixed interest mortgage depends upon the amount of money borrowed, the interest rate charged, and the length of time over which the fixed interest mortgage loan is repaid.

Many Borrowers Interested In Fixed-Rate Mortgages

Why we have many borrowers interested in fixed-rate mortgages in comparison to adjustable-rate mortgages is because many people like the security of knowing in advance exactly how much they will pay per month for the fixed rate mortgages. This seems to be very valuable in planning their budgets. In the real sense, in a stable economy, fixed-rate mortgages are more expensive than adjustable rate mortgages in the long run. They are expensive because it’s the lender who is taking the risk of the future fluctuation of interest rates. The price the lender charges you when they take that risk on your behalf in the case of fixed interest rate mortgages is a lot of money. But the question is: would you mind paying for car insurance so that you can drive a car with insurance or not? Since the amount of money involved in a mortgage is a lot of money, then it’s only good you have insurance on the fluctuation of interest rates. This would therefore make us conclude that fixed-rate mortgages are better than adjustable-rate mortgages.

Calculate Fixed Rate Mortgages (FRM) Using Excel

To calculate Fixed Rate Mortgages (FRM) Using Excel, you will need to have an excel template that will help you. You will need to download this Free MS Excel spreadsheet which is a Home Mortgage Calculator and it’s a small file (350 KB). Once you load this file, it should look like the spreadsheet shown below.

Calculate Fixed Rate Mortgages (FRM) Using Excel
Calculate Fixed Rate Mortgages (FRM) Using Excel

Create Different Scenarios for Your Case

Create different scenarios for your case and play around with figures until you believe you are able to answer the following questions:

1. If you were to have a fixed rate mortgage, how much would you save by making extra payments apart from your standard monthly payments?

2. If you were to have a fixed rate mortgage, how would you explain tax deduction changes as you pay interest change over time?

3. If you were to have a fixed rate mortgage, how much might your monthly payment be worst of over time than if you had borrowed a variable-rate mortgage?

4. If you were to have a fixed rate mortgage, how soon can you off your fixed rate mortgage if I make extra payments?

5. If you were to have a fixed rate mortgage, how will your fixed rate mortgage loan balance be at the end of 2, 3, 10, or 14 years from the date you took the mortgage?

Best Mortgage Fixed Rate

Create this kind of scenarios for your case and play around with figures until you believe you fully understand the fixed rate mortgages. After that, you are now free to go out shopping for the most competitive fixed rate mortgage loan in the market. Ask FRM lenders as many questions as you can so that you can be able to compare the right fixed rate mortgage loan for you.

Analyze Fixed Rate Home Mortgages and Analyze Variable Rate Home Mortgages

This Free MS Excel spreadsheet that you have downloaded will help you to quickly analyze a fixed or a variable rate home mortgage. Be creative and set up periodic extra payments as well as adding additional payments manually within the Payment Schedule to see what happens. Go ahead and compare the different term lengths, rates, loan amounts, and the savings from making extra payments. Use this excel spreadsheet to answer any question that you may think of including calculating the outstanding balance of your mortgage at the end of a specified number of years, the tax returned if the interest paid is tax deductible, etc, etc. If you find some terminologies that you do not understand, hover your mouse over the cells with red triangles and you will be given additional information and instructions which should be very helpful. With this information, you can now go ahead and buy your house or a home. Good luck.

If you have liked this article, and you would want this page to keep up and improved, you can help by purchasing some great items from Amazon by following Amazon links and widgets on this page. A free way to help would be to link back to this webpage from your web page, blog, or discussion forums.

The Author’s page is designed to help beginners and average readers make some money as an extra income to supplement what they may be earning elsewhere - details of which you can find in My Page, if you will.


    0 of 8192 characters used
    Post Comment

    • profile image

      Portugal mortgage finder 

      8 years ago

      Very useful content.

    • thevoice profile image


      8 years ago from carthage ill

      terrific fine hub detail read thanks

    • Hello, hello, profile image

      Hello, hello, 

      8 years ago from London, UK

      Very comprehensive and informative which is very helpful to people in need. Thank you.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)