For most homeowners, a fixed-rate mortgage is the best option when shopping for mortgage plans. What is the difference between a fixed-rate mortgage and an adjustable-rate mortgage, and when is it beneficial to choose an adjustable rate mortgage?
A fixed-rate mortgage keeps the same interest rate throughout the entire loan, which is beneficial to a large percentage of loan recipients. Fixed rates ensure that loans will never dramatically jump in prices because of interest rate hikes. The disadvantage of a fixed-rate loan is that it may be much more difficult to qualify for a loan when interest rates are high.
Adjustable-Rate Mortgages (ARM)
ARMS start off with interest rates below the market rate of a fixed-rate loan, but then the interest rate increases over time. Over a long period of time, the interest rate will be higher than that of a fixed-rate loan.
For a certain period of time ranging from one month to a decade, ARMs have a fixed interest rate, and then the interest rate increases. So when is it beneficial to choose an ARM? If you do not plan to live in your house for a long period of time, then ARMs can be an excellent choice. If current interest rates are high and expected to fall, ARMs could also be a great option.
For either type of mortgage, our independent mortgage brokers advise to research your options carefully and proceed with caution. Our mortgage loan company is here to help you find the best available loan. We work with over forty different lenders, assuring you that we will find the best mortgage rates for you. Contact us now for a free consultation!