What is the difference between a fixed-rate loan and an adjustable-rate loan?
A fixed rate loan is one where the interest rate remains constant throughout the entire term. An adjustable-rate mortgage will generally start off at a lower rate, but then will adjust at fixed periods throughout the life of the loan. It can go as high as the cap or margin amount you agree to on the loan. This means your monthly payments will be periodically recalculated based on the prevailing market conditions at the time.
A fixed-rate loan is one where the interest rate remains constant throughout the entire term. An adjustable-rate mortgage will generally start off at a lower rate, but then will adjust at fixed periods throughout the life of the loan. It can go as high as the cap or margin amount you agree to on the loan. This means your monthly payments will be periodically recalculated based on the prevailing market conditions at the time.
With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an adjustable-rate mortgage (ARM), the interest changes periodically, typically in relation to an index. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM loan will likely change. There are advantages and disadvantages to each type of mortgage, and the best way to select a loan product is by talking to us.
With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an adjustable-rate mortgage (ARM), the interest changes periodically, typically in relation to an index. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM will likely change. There are advantages and disadvantages to each type of mortgage. The best way to select a loan product is by talking to us.
A fixed rate loan is a loan with a permanently fixed interest rate throughout the entire term. An Adjustable Rate Mortgage (Commonly referred to as an ARM) consists of two components: The Margin and the Index. Adding the margin and the index together will equal your rate. The margin is fixed and the index is the portion that can change. There are several different indexes used in mortgage loans; some common indexes used are the MTA, LIBOR, and CMT. An adjustable rate mortgage will most often have a fixed term to start and then adjust at specific periods throughout the life of the loan thereafter. The rate can only go as high as the lifetime cap and change as often as specified in your loan. This means your monthly payments will be periodically recalculated based on the prevailing market conditions and the terms of your loan. For more information and specific Arm loan questions please contact us.
