Fixed Interest Rates

Fixed Interest Rate: A fixed interest rate refers to an interest rate on a debt or security that remains the same for the entire term of the loan or investment. Unlike a variable interest rate, which can fluctuate with changes in market rates, a fixed interest rate doesn't change.

In the context of real estate financial modeling, a fixed interest rate can be advantageous for forecasting purposes because it provides certainty about future interest costs. This makes budgeting and financial planning easier.

However, a fixed interest rate can be a disadvantage if market interest rates fall significantly after the loan agreement is signed, as the borrower will still be obligated to pay the originally agreed upon higher rate. Conversely, if market interest rates rise, a borrower with a fixed-rate loan is protected from increased costs.