When buying a home, choosing the right type of mortgage is important. Fixed-rate mortgages offer stability and predictability, while adjustable mortgages can save you money in the short term but may cause your monthly payments to increase. Here’s a closer look at the differences.
1. Initial Interest Rates and Monthly Payments
With a fixed-rate mortgage, your interest rate and monthly payment are set for the life of the loan. That means you’ll know exactly how much you need to budget each month, making it easier to manage your finances. And because your interest rate won’t change, you’ll have peace of mind knowing that your monthly payment will stay the same even if interest rates rise in the future.
With an adjustable-rate mortgage, on the other hand, your initial interest rate and monthly payment may be lower than with a fixed-rate mortgage. Still, after the initial fixed period ends, the interest may go up based on prevailing market rates. You could end up paying more each month later down the road.
2. Payment Stability
As we mentioned, with a fixed-rate mortgage, your payments are set for the life of the loan, so you’ll always know how much you need to budget each month. With an adjustable-rate mortgage, your payments may go up or down based on changes in interest rates, so there’s more uncertainty when it comes to budgeting.
A fixed-rate mortgage is usually the best choice for borrowers looking for stability. However, if you are willing to take on a little more risk, an adjustable-rate mortgage may offer some advantages. For example, you may be able to get a lower interest rate at first, which could save you money in the short term. Adjustable-rate mortgages can also be a good choice if you expect your income to increase over time, as you may be able to keep up with any increases in your monthly payments. Mortgage companies Boca Raton can help you to make the best choice.
3. Interest Rate Risk
When you have a fixed-rate mortgage, your interest rate is locked in and won’t change no matter what happens in the market. That means you’re protected against rising interest rates, which can save you money over the life of the loan. With an adjustable-rate mortgage, on the other hand, your interest rate is subject to change after the initial fixed period, which means you could end up paying more if rates go up.
So which type of mortgage is right for you? It depends on your circumstances and financial goals. Talk to a Mortgage Coral Springs professional to learn more about your options and find the best mortgage. Mortgage Coral Springs can help you weigh all these factors to make the best decision for your unique situation.
4. Length of Loan
A fixed-rate mortgage is typically paid off over 15 or 30 years, while an ARM may have a shorter initial term (5, 7, or 10 years) before the interest rate adjusts. If you plan on staying in your home for many years and want the stability of predictable monthly payments, a fixed-rate mortgage may be the way to go. On the other hand, if you anticipate moving within the next few years or want to take advantage of low initial rates, an ARM could save you money in the long run. Mortgage companies Boca Raton can help you decide which is best based on your financial situation and goals.
5. Mortgage Insurance
If you have a fixed-rate mortgage with less than 20% down, you’ll likely have to pay mortgage insurance, which can add to your monthly payment. With an adjustable-rate mortgage, on the other hand, there’s no mortgage insurance required. Ace Mortgage in Coral Springs, FL, is committed to helping our clients find the best possible mortgage for their needs. We offer fixed-rate and adjustable-rate mortgages, and we’re happy to help you choose the right one.
6. Refinancing Options
If you have a fixed-rate mortgage and interest rates drop, you may be able to refinance and get a lower rate. However, refinancing may not be an option with an adjustable-rate mortgage since your interest rate will eventually adjust upward. Refinancing can be a daunting task, especially for first-time homebuyers. Home financing Pompano offers guidance and assistance to help you through the process. Home financing Pompano provides a mortgage lending specialist who will help you choose the right type of mortgage for your individual needs, whether fixed-rate or adjustable.
Ultimately, the type of mortgage you choose is a personal decision. If you’re unsure which type of mortgage is right for you, talk to a qualified lender who can help you compare your options and choose the best loan for your needs. Ace Mortgage is a leading mortgage lender in Florida with over 20 years of experience in the industry. We offer fixed-rate and adjustable-rate mortgages, and we’re happy to help you choose the right one. Contact us today to learn more about our products and services or apply for a loan.