Homebuyers are keenly aware of interest rates on a home’s mortgage when searching for a home. When researching the best mortgage, know that there are two rates to choose from, fixed and adjustable, and how they can affect you.
Fixed-Rate Mortgages Charge a Set Interest Rate
When you choose a mortgage with a fixed-rate, the interest rate is set throughout the life of the loan. Fixed-rates are a great option for homeowners who want the predictability of future payments and the ability to easily budget. A 30-year fixed-rate mortgage is one of the most common mortgages chosen by homeowners who are planning on staying in their home for the long term.
Adjustable-Rate Mortgages Charge a Variable Interest Rate
Adjustable-rate mortgages are exactly what they sound like: a mortgage with an interest rate that will adjust over time. Also called an ARM, this mortgage tends to start at a fixed lower rate, called an introductory period, before adjusting. ARMs come in period terms of 5-, 7-, and 10-years. Talk with your lender about what period terms are available and if an ARM is in your best interest.
Ask your lender:
- How frequently interest rates will adjust
- If there is a limit on how low and high the interest rate can go
- How soon payments could increase
When searching for a home, work closely with your lender and the expert realtors at Merchant of Homes. We will always work with you to guide you through the process of finding the best home for you and help you understand the market.