Buying a new home can be scary. There are many new terms that one must learn in order to be sure they’re getting the best deals. Some of those terms include adjustable-rate loans and fixed-rate mortgages in Boca Raton. These are two common words that lenders will use, and it’s a good idea to understand their meanings. In this article, we’ll cover the basic differences between the two. Afterwards, you’ll have a clearer idea of which rate works better for you, your lifestyle, and your overall desire. Let’s dive in!
The Basics of an Adjustable-Rate Loan and a Fixed-Rate Mortgage
The basics of both are quite simple, especially as the name speaks volumes. The main difference between the two is that an adjustable-rate mortgage is subject to change in pricing monthly, due to the market’s fluctuation in interest rates. A fixed-rate loan does not change in price at all over the course of the loan. While it seems that most people would choose a fixed-rate loan, there are some benefits of choosing an adjustable-rate. Let’s look at the details.
Most adjustable-rate mortgages, or ARMs, offer a lower interest rate than fixed-rate loans. Now, payments might not see much of a change in the first year or so, but afterwards, as the market shifts, those numbers could increase. In the mortgage world, there is something called index. Index represents a broader category of interest rates. When the index rises, so does the interest rate. People who decided upon a fixed-rate loan won’t need to worry about these changes, as they’ve chosen a higher interest rate with more stability. However, for those that choose an adjustable-rate option, chances are they’ll constantly be watching the market to know where their monthly payments are headed. A benefit of adjustable-rate loans is that if the interest rate or index lowers, the monthly payments could lower as well. Granted, every adjustable-rate is different, so it’s important to know what you’re getting before signing on the dotted line. Some information to know about adjustable-rates include knowing how high the interest rates and monthly payments can rise, how often they will rise, and soon your payments can rise, and more.
If you’re looking to talk to a professional, you can call Ace Mortgage Loan Corporation today. We’ve been working with South Florida residents for years, decades even! In business since 1996, it’s no secret that we put our client’s needs and desires first. We offer a plethora of loan options including fixed-rate, adjustable-rate, Fannie Mae & Freddie Mac, VA loans, FHA loans, HARP loans, and more. When you choose your mortgage in Boca Raton with Ace Mortgage Loan Corporation, you’ll be happy you did! Call us today at 954-777-4774 and see how we can help you secure your future!