Choosing between an adjustable rate mortgage and a fixed rate mortgage for your home loan is a very important choice. Each of these choices has both good and bad things about it. But in the end, the choice comes down to how much personal and financial risk a person is willing to take, as well as personal preference.
This short article will look more closely at both types of loans to help you decide which one is best for you.
A fixed-rate mortgage is a good choice for people who like to know exactly how much they will have to pay each month on their mortgage. With a fixed rate mortgage, nothing comes as a surprise. It's also a good choice for people who plan to stay in their home for the whole loan period or at least for a long time. They are also good for people who have a fixed income.
There are some bad things about fixed-rate mortgages. For example, mortgages with fixed rates are not as flexible as mortgages with rates that change over time. If interest rates go down, you can't save money on your loan unless you refinance. Also, the starting interest rates for fixed-rate mortgages are usually higher than those for adjustable-rate mortgages (ARMs).
Rates on adjustable-rate mortgages start out lower, but they go up after a certain amount of time. This means that a person's payments will be lower at first, but they will go up as the interest rate goes up. This could be a good choice for someone who doesn't plan to stay in their house for very long or who is having trouble paying their mortgage because of a short-term problem, like losing their job, having a baby, etc.
This option could give people a year or two to get their finances back on track before they have to pay the higher payments that come after the initial low rates of an adjustable rate mortgage.
Fixed-rate mortgages and adjustable-rate mortgages are very different ways to get money. Fixed-rate mortgages are good for people who like to know as much as possible about how much money they will spend. They are also a good choice for people who don't like to take risks with their money.
Adjustable rate mortgages are a good choice when interest rates are low, if you don't plan to stay in your home for a long time, can't afford to make big payments at first, or just want to save money. When deciding whether or not to borrow money, it's important to take a good look at your level of risk, your financial plans, and how much you can handle.
