Struggling to choose between fixed-rate and adjustable-rate mortgages? Read on to study the differences between the two and decide accordingly. If you aspire to become a homeowner one day, you’ll likely find yourself exploring mortgage options to finance your dream home. When you obtain a mortgage loan, you’ll typically repay in monthly installments along with interest for a period of around 15 to 30 years. The amount of interest you’ll pay and whether or not it will be subject to fluctuations will depend on your choice between a fixed-rate mortgage and an adjustable-rate mortgage. This guide will discuss the key difference between the two mortgage options: Fixed-Rate Mortgage vs. Adjustable-Rate Mortgage: The Key Difference As their names suggest, the primary difference between a fixed-rate and an adjustable-rate mortgage relates to whether the interest rate is subject to change or not. When you acquire a fixed-rate mortgage, your interest rate stays fixed or the same throughout the life of the home loan. If for instance, the loan term is 30 years, you’ll keep paying the same interest rate till the end of the period. In the case of an adjustable-rate mortgage or ARM, your interest rate will stay fixed for a limited time period, after which it will start fluctuating based on the US market trends. Typically, the rates will increase. For example, an ARM may lock in your interest rate for the first five years, after which it will change once a year. ARMs typically begin at a lower interest rate than what you’ll pay in a fixed-rate mortgage. After the end of the introductory period when the rate stays the same, the amount you pay is likely to go up. During this period, your interest rate is determined by a broader index of rates. When this increases, your payment goes up and vice versa. Some ARMs, however, place a cap on how high or low your interest rate can go. Which One Should You Consider? A simple rule of thumb to decide between a fixed-rate and an adjustable-rate mortgage is to examine the current and expected interest rates. If they are low but rising, a fixed-rate mortgage should protect you from outrageously high interest rates in the future. If, however, the rates are high and are predicted to decline in the foreseeable future, obtaining an ARM might be the wiser choice. Since you won’t be locked into a particular rate, you’ll benefit from the drop in interest rates. Nevertheless, if a predictable, steady payment suits your better, go for a fixed-rate mortgage. If you do choose an ARM, be sure to determine how soon the interest rate can rise, how frequently it will adjust, whether you’ll be able to make timely payments if the rates go up, and other factors. Also, don’t assume that you’ll be able to refinance or sell your home before the rate adjusts. Your financial condition can change or the value of the property may decline. So, give Elite Mortgage Source a call at (239) 307-6300 and schedule an appointment. You can drop us an email at don@elitemortgagesource.com, our team will get back to you as soon as possible! For more advice on choosing between a fixed-rate and adjustable-rate mortgage, contact Elite Mortgage Source today!