With all the mortgage loan options available, are you having trouble figuring out which one is right for you? Understanding the differences between various mortgage loan types, terms, and rates can certainly be confusing. Let’s take a closer look at mortgage loans with a discussion about the difference between a fixed-rate and adjustable-rate mortgage.
Difference Between a Fixed-Rate Mortgage and Adjustable Rate Mortgage
First, a fixed-rate home mortgage loan refers to a loan that charges the same interest rate for the duration of the loan. Usually, the time period for that mortgage is 15 or 30 years. A fixed-rate mortgage is a great option when interest rates are low and when you want a consistent monthly payment amount. You can lock in a low rate and pay this for the duration of the loan. If interest rates go up, you won’t need to worry, because you have a guaranteed rate.
There is a reason why it’s such a popular type of home loan. It offers stability and consistency for your home budget. And if you have a lower interest rate, even better.
As you can probably guess by its name, the adjustable-rate home mortgage loan is just how it sounds – the interest rate is adjustable. And it’s adjustable throughout the life of the loan. An adjustable-rate mortgage can be the perfect way to get in a home for the right home buyer. The loan will actually start out with a fixed-rate and then after a period of time, it will start to adjust.
Adjustable-rate home loans are available in different formats: 3/1, 5/1, 7/1, and 10/1. The first number is the number of years the loan will be fixed at a certain rate and the second number will be how often your rate will adjust. These are just examples, but your lender will be able to expand on this topic.
Why choose an adjustable-rate mortgage or ARM? An adjustable-rate mortgage can offer a lower interest rate at the beginning of your home loan period compared to a fixed-rate mortgage. If you are relocating for a short time and plan on selling before the interest rate adjusts, this could be the right loan for you. Or if you plan on paying the loan off before the interest rate adjusts it can be the perfect mortgage to buy your new home with.
Is A Fixed Rate Or Variable Rate Mortgage Better?
This really isn’t a question we can answer. The best home loan is the loan that you have reviewed thoroughly and that works best for your budget, and the number of years you intend to live in the home.
An ARM or Adjustable Rate Mortgage can offer flexibility and affordability for just the right family. While a fixed-rate mortgage will be the perfect choice for the homeowner that wants long-term dependability for their home loan.
Working With An Experienced Memphis Area Real Estate Agent
When it’s time to sell your existing home or buy a great new place, turn to a highly regarded and well-informed local real estate agent. You want someone that you can trust to give you the best advice and know-how for your new home purchase or sale. Check out my other great articles to help you through your home selling and buying experience here in Memphis. Staging homes for sale is also part of my expertise. Please ask me about it when you reach out.
Take a minute to learn more about me. With over 15 years of top-notch service for my clients, I can guide you with your house sale, new home purchase, or buying a great parcel of land. As a top, licensed real estate agent in the Memphis area, showing you the best properties for you and your family is my goal!
Contact me at (901) 828-8919 or drop me a quick note at angie@angiekelley.com and we can speak in person about your plans and options. Ask me about seeing homes for sale by video or virtual tour and find the best place for you!
Angie Kelley, Crye-Leike Realtors
(901) 828-8919 or (901) 756-8900
