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Fixed Rate Mortgage vs. Adjustable Rate Mortgage
The most basic distinction between types of mortgages that are available when you're looking to finance the purchase of a new home is how the interest rate is determined. Essentially, there are two types of mortgages - fixed rate mortgage and an adjustable rate mortgage. If you choose a fixed rate mortgage, the rate of interest that you are paying on your mortgage remains the same throughout the life of the loan no matter what general interest rates are doing. In an adjustable rate mortgage, the interest rate is periodically adjusted according to an index that rises and falls with the economic times. There are advantages and disadvantages to either, and no easy answer to 'which is better, a fixed rate mortgage or an adjustable rate mortgage?
The main advantage to a fixed rate mortgage is stability. Since the interest rate remains the same over the entire course of the loan, your monthly payment is predictable. You can count on your monthly mortgage payment to be the same amount each month. On the minus side, because the lending institution gives up the chance to raise interest rates if the general interest rates rise, the interest on a fixed rate mortgage is likely to be higher than that of an adjustable rate mortgage.
A fixed rate mortgage loan makes the most sense for those that are going to settle into their home for many years. While the initial payments may be larger than with an adjustable rate mortgage, stretching the payments over a longer period of time can minimize the effect on your budget.
An adjustable rate is one that is adjusted periodically to take into account the rise or fall of standard interest rates. Generally, the adjustable term is annual - in other words, once a year the lending company has the right to adjust the interest rate on your mortgage in accordance with a chosen index. While adjustable rate mortgages make the most sense in a situation where interest rates are dropping, though it's dangerous to count on a continued drop in interest rates.
Lenders often offer adjustable rate mortgages with a very low first year 'teaser' interest rate. After the first year, though, the interest rate on your mortgage can increase by leaps and bounds. Even so, there are limits to how much an adjustable rate can actually adjust. This is dependent on the index chosen and the terms of the loan to which you agree. You may accept a loan with a 2.3% one year adjustable rate, for instance, that becomes a 4.1% adjustable rate mortgage on the first adjustment period.
Finally, there's a new kind of loan in town. A hybrid between adjustable rate mortgages and fixed rate mortgages, they're known as 'delayed adjustable' mortgages. Essentially, you lock in a fixed rate of interest for a number of years - say 3 or 7 or 10. At the end of that period, the loan becomes a 1 year adjustable rate mortgage according to terms set out in the agreement you sign with the mortgage or financial institution.
MORE RESOURCES updated Wed. August / 12 / 2020
How to get a low-cost mortgage refinance Bankrate.com
Mortgage Rates Hit Yet Another Record Low The Motley Fool
Refi Rates Today, August 10, 2020 | Rates drop Bankrate.com
Don't let mortgage rates distract you. You should also consider this when refinancing - Fox Business
Mortgage rates are at historic lows: Is it time to refinance? Burlington Times News
How much does it cost to refinance? Bankrate.com
Mortgage Rates Today, August 11, 2020 | Rates climb Bankrate.com
Is It Already Time To Refinance Again? Mortgage News Daily
Refi Rates Today, July 24, 2020 | Rates slide Bankrate.com
Rocket’s Refinance-Fueled Blastoff Might Not Last The Wall Street Journal
You might have a tough time getting a 'jumbo mortgage' during pandemic. Here's what to expect - CNBC
How the right questions yield smart mortgage... Kent Reporter
How to Refinance a Jumbo Loan Credible News
Don't make these mortgage refinancing mistakes | Business | swoknews.com The Lawton Constitution
What Is A No-Closing-Cost Mortgage? Bankrate.com
Mortgage denial stats by race: What we can learn | Mortgage Rates, Mortgage News and Strategy - The Mortgage Reports
Mortgage denial stats by race: What we can learn | Mortgage Rates, Mortgage News and Strategy The Mortgage Reports
Can you refinance your mortgage a second time (or more)? Yahoo Finance
Bots Help Meet Mortgage Demand Credit Union Times
Mortgage industry faces 'tsunami' of refinancing deals Phoenix Business Journal
How Does Mortgage Repossession Work? The Motley Fool
Report: Fewer Homeowners Think Now Is a Good Time to Buy The Motley Fool
Compare mortgage, refinance, insurance, CD rates Bankrate.com
Mortgage refinance: Everything you need to know Fox Business
How to get the best mortgage refinance rates Fox Business
How to refinance your mortgage Fox Business
Just Approved: Run, don't walk to refinance Beaumont Enterprise
Is Your Mortgage Forbearance Ending Soon? What To Do Next Realtor.com News
Is now the best time to refinance your mortgage? Fox Business
10 things to know before refinancing your mortgage Fox Business
Six Ways COVID-19 Has Affected Home Lending whatcomtalk.com
Money Roundup: South Florida GDP plunge worse than national average; Local billionaires made billions in first months of pandemic and more - South Florida - South Florida Business Journal
Money Roundup: South Florida GDP plunge worse than national average; Local billionaires made billions in first months of pandemic and more - South Florida South Florida Business Journal
Sell Rocket Companies: It Is REKT Seeking Alpha
When should you refinance your mortgage? Fox Business
Mortgage refinance applications spike 79% as homeowners rush to take advantage of lower rates - CNBC
Refinancing boom hits Central Coast Pacific Coast Business Times
With Mortgage Rates So Low, Getting a Floating Rate Mortgage Might Seem Crazy. Here's Why I Did It Anyway - MONEY
With Mortgage Rates So Low, Getting a Floating Rate Mortgage Might Seem Crazy. Here's Why I Did It Anyway MONEY
Record number of borrowers can now save on a mortgage refinance as rates drop from coronavirus fears - CNBC
Record number of borrowers can now save on a mortgage refinance as rates drop from coronavirus fears CNBC
How does mortgage refinancing work? Bankrate.com
Should I refinance my house? Mortgage rates drop to 50-year low as coronavirus spreads across the U.S. — and the world - MarketWatch
Should I refinance my house? Mortgage rates drop to 50-year low as coronavirus spreads across the U.S. — and the world MarketWatch
Washington Post: Reverse Mortgage a Possible Option for 'Underwater' Homeowner - Reverse Mortgage Daily
Washington Post: Reverse Mortgage a Possible Option for 'Underwater' Homeowner Reverse Mortgage Daily