Mortgage and Refinancing Information Channel:

We would like to thank the local libraries, schools, and universities for recommending students to visit us when doing research on any of our information topics.
 Please check back frequently as new topics are added and current topics are updated daily.

How to Compare Fixed Rate Mortgages and Adjustable Rate Mortgages

There are many types of mortgages, and the more you know about them before you start, the better. To compare one Adjustable Rate Mortgage with another or with a fixed-rate mortgage, you need to know about indexes, margins, discounts, caps, negative amortization, and convertibility. You need to consider the maximum amount your monthly payment could increase. Most important, you need to compare what might happen to your mortgage costs with your future ability to pay.

FIXED RATE MORTGAGES

In a fixed-rate mortgage, your interest rate stays the same for the term of the mortgage. The main advantage of a fixed-rate mortgage is that you always know exactly how much your mortgage payment will be, and you can plan for it.

Benefits and Advantages:

- Low rates for the full term of your mortgage

- Security of a fixed monthly payment for the life of you loan, regardless of fluctuations in interest rates

- More stability may give you peace-of-mind

Disadvantages

- Higher initial monthly payments compared to those of adjustable rate mortgages

- Less flexibility

ADJUSTABLE RATE MORTGAGE (ARM).

With this kind of mortgage, your interest rate and monthly payments usually start lower than a fixed-rate mortgage. But your rate and payment can change either up or down, as often as once or twice a year. The adjustment is tied to a financial index. Throughout the life of that loan, the principal and interest payment will adjust periodically based on fluctuations in the interest rate.

Benefits and advantages:

- Lower Initial payments due to lower beginning interest rate

- Ability to qualify for a higher loan amount due to lower initial interest rates

- Lower interest payments if the interest rate drops over time

- Interest rate caps limit the maximum interest payment allowed for the loan

Disadvantages

- Your future monthly payment is uncertain.

- Initial lower interest rate and monthly payments are temporary and apply to the first adjustment period. Usually, the interest rate will rise after the initial adjustment period.

- Higher interest payments if the interest rate rises over time

SUMMARY

A Fixed Rate mortgage will offer you the security of knowing that your mortgage interest rate will not change during the term of your fixed rate. The advantage of an Adjustable Rate Mortgage is that you may be able to afford a more expensive home because your initial interest rate will be lower. A Fixed-Rate Mortgage applies the same interest rate toward monthly loan payments for the life of the loan. Fixed-rate mortgages are more straightforward and easier to understand than ARMs. They are more secure for the buyer and they are very popular with first-time home buyers. Since the risk to the lender is higher, fixed-rate mortgages generally have higher interest rates than ARMs. A fixed rate mortgage is ideal for anyone who likes to budget monthly expenses and plans to keep their home for several years.

A more detailed version of this article including a glossary of terms is available at: http://www.us-banks.org/archives/1970

[Disclaimer: This article is provided for information purposes only. No warranty is either expressed or implied. Under no circumstance will the author be liable for any loss or damage caused by a user's reliance on this information.]

Copyright © 2005. Chileshe Mwape writes for The US Banks Guide: http://www.us-banks.org/. Find informative articles and news stories about banking and finance.

This article may be reprinted as long as all the above links are active and clickable.

MORE RESOURCES

used office furnishings-supplies-equipment-desks-cubicles-service-counters for sale in Akron Ohio   Die cast model cars for sale in Akron Ohio  
used cars for sale in Akron Ohio   unfurnished homes for rent in Akron Ohio

RELATED MORTGAGE AND REFINANCING ARTICLES: Things that You Need to Know before Financing Your Home Frequently Asked Questions:What are Points? A. There are several types of mortgage related costs called "points" and their definitions and purposes vary. Stopping Foreclosures If you as an investor understand the process, you will be able to help more people! Foreclosure is tuff on folks it's all about losing! Your customer loses their home and the lender loses money! If you can get your focus going in the right direction, you can create a Win - Win scenario for all involved. Writer and philosopher Johann Wolfgang von Goethe said, "Kindness is the golden chain by which society is bound together. Mortgage Clarksville - Find the Best Deal Searching for a mortgage can sometimes be a hassle. Where to apply, who to apply with, what deal to take. What is a Self-Employed Mortgage? Self-employed mortgages, as the term implies are mortgages designed for those that are self-employed. Traditionally it's been more difficult for the self-employed to get mortgages. Self Employed Mortgage Loans - A Survival Guide When you're self employed you have numerous advantages. As you are a free agent, you will write off every deduction you can on your tax return. A Home Equity Loan - Is It For You? Home equity loans are often touted as being the solution to so many things - giving you access to money for home repairs or improvements, a way to consolidate debt, finance a sudden family emergency, or even as a way to start an investment portfolio. There's a lot to think about, though, before you go and sign up for the first home equity loan you see. Bad Credit Mortgage Lenders - Things You Should Know About Subprime Lenders Interest rates and fees vary between subprime lenders just like regular mortgage lenders. Just because you have bad credit, that doesn't mean you should accept the first financing offer from a subprime lender. Homeowners' insurance: The mortgage connection A home owners' insurance is the cover for the house against natural calamities as well as liability. This covers the house and its contents but also other personal possessions which the house secures. Home Mortgage Loan Pre-Approval Online - Keys When Applying For A Mortgage Online Applying online for a mortgage is very fast and easy. Just make sure of a few things before you start to look for places to apply to. Adjustable vs. Fixed Rate Mortgages Mortgage rates can either be fixed for the duration of your loan or can be adjustable. An adjustable rate mortgage is a loan that is set up with an interest rate that changes based on pre-determined criteria, primarily tied to the federal interest rate. The Best Tactics for Getting a Quick Homeowner Loan Trying to find a quick homeowner loan can seem difficult at times, especially considering the days or even weeks that it can take for some banks and other lenders to approve or deny a loan. The worst part is that if you're denied your loan, then you have to start over at another bank and go through the same wait again! Luckily, there are other options available that speed up the process of getting a quick homeowner loan? you just have to know where to look for them. Home Loans and Mortgages - Beware of New "Mortgage Elimination" Scam The booming real estate market has allowed many Americans to become "equity rich." They may not have a lot of cash on hand, but they might have equity in their homes worth several hundred thousand dollars or more. Home Equity Loans: A Useful Financial Tool The investment need of an individual varies with time. Thus the need to buy a car or invest in a new house, which may have seemed "beyond means" a few years ago, may be a relevant and wise decision today. 2nd Mortgage - Better Than Refinancing You have probably received refinancing offers in the mail or advertised online touting your ability to pull out your home's equity. But a 2nd mortgage, also called an equity loan, may be a better financing option than refinancing your mortgage. Remortgage Serves To Rewind The Reimbursements Of Mortgage It takes a mighty big effort to secure a home and even mightier to convert it into an earning member. Can a home be converted into an earning member? In contemporary configuration anything is possible! You must be aware of the advantages of mortgage, for you certainly have opted for that before going for a remortgage. Little Known Secret: Eliminate your Mortgage in 23 years or less! Wanna know a little secret? There is an ingenious method you can use, to pay off your 30 year fixed rate loan, in 23 years or less. It's straightforward, simple, and easy to understand. Refinancing Your Mortgage Can Really Save You Money Refinancing a mortgage is simply taking out a new mortgage. It means paying off one or more old debts by getting a new loan. Mortgage Lead and Mortgage Leads A mortgage lead is an exciting thing because you are filled with the thought of buying a house. Mortgage leads are listings of information dealing with how much a house will be. Securing a Cheap Home Improvement Loan Finding a cheap home improvement loan can be a challenge at times, but the extra work involved can pay off by saving you money in the long run.Taking the time to get extra quotes, do a bit more research, and finding the best people to work on your home improvements is always a good idea? and if it results in a cheap home improvement loan, all the better!How home improvement loans workThe first step to finding a cheap home improvement loan is to know exactly how it is that home improvement loans work. First Time Home Buyer Loans Made Easy When it comes to first time home buyer loans, a little research can save you thousands of dollars over the life of your mortgage. A wise consumer selects a mortgage lender prior to shopping for a home.

HOME | SITE MAP © 2012 - 2023 All Rights Reserved Increase pagerank with HitsSurfer