Many people feel confused with mortgages because there are many types and differences with them. One difference with mortgages is the way the interest rate works. Some will offer a fixed rate, while others offer an adjustable rate. If you feel that a fixed rate is the best option, you should know that this is usually true but not always. Here are several things to consider as you decide which is right for you.
The key distinction
Before going any further, you should understand the key distinction between these two choices. A mortgage that offers a fixed rate is one that has an interest rate that will never change for the entire lifetime of the loan. If you get a 4% rate today on a 30-year loan, the rate will always be 4%.
An adjustable-rate on a mortgage is subject to change, and the change will occur according to the terms of your loan. If your terms state that the rate is good for five years, then it would not change for five years. If it says ten years, then you are safe for the next ten years.
One key thing to know is that the rate on an adjustable-rate mortgage can change after a certain length of time but may not change.
Times when adjustable rates are superior
There is one main situation where choosing a rate that changes may be the better choice for you. If you can get a rate that is significantly lower just by choosing an adjustable rate, and if you plan on selling the house prior to the interest changing on the loan, you should choose an adjustable-rate.
Tips for choosing the right loan type
The interest on a loan is a vital aspect of any mortgage, but it is not the only option you have. You will also have to choose a mortgage loan program and a duration. To make the right choice, you should meet with a loan officer at a bank or lending firm. You should fill out an application and allow the lender to retrieve your credit score. Next, ask the lender for advice about the loan options you have. If you have several choices, compare them and look for the one that is best for your situation.
You can get started on the process by calling a lender of your choice. The lender will walk you through the steps you must complete.
To learn more about fixed-rate mortgages, consult a mortgage broker in your area.