A loan whose interest rate is set at closing and does not change for a stated period, often the whole term, so the principal and interest payment stays the same.
With a fixed rate the borrower knows the payment and the lender carries the risk that rates rise. Lenders manage that risk in two ways a borrower will feel. First, the fixed period is often shorter than the loan: a bank may fix the rate for five years on a loan that amortizes over 25, then reset it or require payoff. Ask how long the rate is fixed, not only what it is. Second, fixed rate loans tend to carry a prepayment charge, because, as the OCC’s handbook notes, borrowers refinance when rates fall.
A lender that sells or securitizes its loans may offer a longer fixed period than one that keeps them, so the lender type shapes what is on offer.
For 7(a) loans, SBA’s rule allows a reasonable fixed rate up to a maximum SBA publishes. The loan manual adds that the note must state the specific rate and the payment must fully amortize the loan by maturity. It also describes a hybrid: a lender may delay the first adjustment on a variable rate loan, and some have held the rate for as long as five years.
How it shows up in the data here
Partly public. HMDA rows carry an interest rate and the months until the rate can first change, and loan comps prints the median reported rate and term by lender for multifamily and 1-4 unit investor loans made. Call reports show balances only, and SBA loan rows do not say whether a rate was fixed. Work out a fixed payment in the amortization and balloon calculator.
Go further
- Multifamily loan comps: Multifamily loans made, with median reported rate and term by lender.
- Amortization and balloon calculator: Payment, balance over time and the balloon due at maturity.
- Amortization and balloon calculator: Payment, balance at maturity and interest paid, for a loan that amortizes over longer than it runs.
- SBA 7(a) payment calculator: Monthly payment with the FY2027 upfront guaranty fee, with the fee paid in cash or added to the loan.
- How bankers evaluate a commercial loan deal: A credit officer asks one question five ways: how will this loan be repaid, and what happens if it is not? Knowing the five tests lets you size a request before you send it.
- SBA 7(a) or 504: which fits your loan: Both are SBA loans, and they work differently. The choice usually turns on what you are buying and how much cash you can put in.
Related terms
- Adjustable rate loan: A loan whose interest rate resets on a schedule to an index, such as prime or SOFR, plus a fixed spread, so the payment can rise or fall over the term.
- Rate lock: A lender's commitment to hold a quoted interest rate for a set number of days before closing, often backed by a deposit the borrower can lose if the loan does not close.
- Prepayment penalty: A charge a loan agreement sets for paying off some or all of the principal before a stated date. Common forms are a step-down schedule, yield maintenance and defeasance.
- Spread (margin over an index): The fixed number of percentage points a lender adds to an index, such as prime or SOFR, to set a loan's interest rate.
- Amortization: The schedule on which a loan's principal is paid down through regular payments. The amortization period sets the payment size and can be longer than the loan's term.
- Permanent loan: A longer-term loan on a finished, leased property that replaces the construction or bridge loan and is repaid from the property's income.
Sources
- 13 CFR 120.213, What fixed interest rates may a Lender charge?, retrieved .
- SBA SOP 50 10 8.1, Appendix 18, 7(a) Interest Rate Requirements (Interest Rate Requirements for an SBA Note; Amortization; Frequency of Interest Rate Adjustment), effective .
- OCC Comptroller's Handbook, Commercial Real Estate Lending, Version 2.0 (Interest Rate Risk, p. 13), published .
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.