Fixed-Rate Mortgage

With a fixed-rate mortgage, the rate set at closing never moves, so principal and interest stay identical from the first payment to the last. It is the most common long-term loan for the refinance step of BRRRR, because it locks in the payment that the rent has to cover for as long as the investor holds the property.

Take the default refinance: $375,000 for 30 years at 7.25% works out to roughly $2,558 of principal and interest, and that figure holds for all 360 payments. Rent can rise over that time; the payment will not, so cash flow tends to improve as the property ages.

The trade-off is that fixed loans usually price a little higher than the opening rate on an adjustable loan. If rates fall later, the investor can refinance again, but that means another appraisal and another round of closing costs. Some investment loans also carry prepayment penalties that make an early exit expensive.

Further reading: Fixed-Rate Mortgage on Wikipedia.