Fix or Adjustable Rate Mortgages
There isn’t a single or simple answer to this question. The right type of mortgage loan products for you depends on many different factors:
* Your current financial picture
* How you expect your finances to change
* How long you intend to keep your house
* How comfortable you are with your mortgage payment changing
For example, a 15-year fixed rate mortgage can save you many thousands of dollars in interest payments over the life of the loan, but your monthly payments will be higher. An adjustable rate mortgage “ARM” may get you started with a lower monthly payment than a fixed rate mortgage, but your payments could get higher when the interest rate changes.
The best way to find the “right” answer is to discuss your finances, your plans and financial prospects, and your preferences frankly with a mortgage professional.
30 Years, 20 Years, 10 Years
- Interest rate does not change.
- Principal and interest (P & I) does not change.
- Fixed-rate mortgages fully amortize over a defined period of time and are paid in-full at the end of the loanterm.
- Different loan terms are available (15- and 30-year terms are most popular).
- The shorter the term, the faster equity is built and the loan is paid off.
10 Years, 7 Years, 5 Years
- P & I payment and interest rate do not change
- Regular monthly P & I payments are based on 30-year amortization, while the unpaid balance (balloon) is due at the end of a shorter, predetermined term, typically 5, 7 or 10 years.
- Interest rate is typically less than fixed–rate loans.
- Most borrowers anticipate refinancing or selling prior to the end of the balloon term.