The Key Differences - Fixed vs Adjustable Rate Mortgage
Aside from choosing which mortgage lender you’ll secure to purchase a home, you’ll also need to decide whether to get a fixed or an adjustable-rate mortgage (ARM). The rate type will determine the amount of interest charged on your mortgage loan monthly and for the life of the loan.
Last month, bankrate.com reported that the national average for a 30-year fixed-rate mortgage was down from 7.04% to 6.99%, while rates for ARMs rose to six basis points, or +0.06%. If you’re buying a home this year, it’s imperative that you pay attention to these kinds of reports as they’ll impact your buying power.
Understanding the differences between fixed and adjustable rates will help you make informed decisions that will fit your financial situation.
Fixed-rate mortgage (FRM)
A fixed-rate mortgage is a type of mortgage rate with a set rate of interest that does not change throughout the life of the loan. This is the most popular choice for homeowners who want to have a set mortgage payment. Here are some advantages of fixed-rate mortgages:
Adjustable-rate mortgage (ARM)
An adjustable-rate mortgage is a type of mortgage rate with an initial fixed-rate period. Once that period ends, your mortgage interest rate may change periodically. Most ARMs will have an initial fixed-rate period of three, five, or ten years. Here are some advantages of adjustable-rate mortgages:
To determine what type of mortgage rate and loan you can qualify for, use Clark County Credit Union’s mortgage affordability calculator. Ready to apply, CCCU’s online application will start your homebuying journey, or speak with a mortgage professional at 702-228-2229 option 1.