What is the advantage of a fixed-rate mortgage on a variable rate mortgage?
Fixed rate mortgages usually have lower rates that variable-rate mortgages Fixed rate mortgages # require payments lower than variable rate mortgages # The interest on fixed rate mortgages not # The interest may fall into a fixed rate mortgage can not rise
Simply put, a fixed-rate loan can not be changed during the life of the loan. Thus, their principal and interest payment will remain the same. The comfort of knowing the loan terms will not change is the most popular reason, a fixed rate is chosen. With a variable rate loan, you risk having your increased mortgage payments when rates determined in the market place higher than what we had at the start of your loan. Historically, when you apply for a mortgage, variable rate loans are more attractive in the short term, since they often have a lower interest rate for the initial period. I refer to loans, called Hybrid ARMAS, usually have a duration of 1, 3, 5, 7, or 10 years when set the rate. After that period expires, the rate is subject to current market conditions (This is when the rate may rise or fall depending on the index underlying the loan.) Factors to consider before choosing a variable rate loan through the security of a fixed rate loan are: 1. How long you expect to own your current home? 2. What is the difference in your monthly payment on a variable rate verses fixed rate loan? 3. How prepare the funding to adapt to a rate adjustment, if you were to hold the loan beyond the initial fixed period?
Mortgage Information : How to Find Low Interest Rates 30 Year Fixed Mortgage
