When talking to a lender, there are two basic type of mortgages they will offer you. These are called fixed-rate and adjustable-rate mortgages. For most homeowners, fixed-rate loans are preferable if they plan to live in the home for an extended time. However, adjustable-rate mortgages are also offered for those who want lower interest rates with a shorter loan term. Keep reading to learn more about these two mortgage loans and see which one is right for you.
As this loan implies, the rate for the mortgage is fixed, meaning that it does not change for the life of the loan. Likewise, the monthly payment remains the same too. Repayment of a loan can range from 30 years to shorter lengths of 10-20 years. If you do choose a short loan term, understand that you will have larger monthly payments, but lower total interest costs over time. On the hand, a longer loan term with lower monthly payments is a more desirable option for committed buyers.
If you plan to live in your home for a few years, then an adjustable-rate mortgage, or ARM, may be more suitable for you. Since the monthly payment is not set, it will change over the life of the loan. Rates for the loan will also fluctuate, although there is usually a limit on how much it will go up or down. “Lenders often offer lower interest rates for the first few years of an ARM, sometimes called a teaser rate, but rates can change after that– as often as once a year. The initial interest rate on an ARM tends to be significantly lower than that on a fixed-rate mortgage.”
Before making a big decision on a mortgage loan, make sure you are informed first. At American Mortgage Resource Inc., we offer the lowest competitive mortgage rates in Waltham, MA and surrounding areas. Let us help you choose the right home loan by contacting us at (617) 972-8588. You can also find more information on our website visitamr.com. Call today!