Fixed v. Adjustable Rate

Choosing the Right Home Loan

One option will likely make more sense for you, depending on a few big factors, like: how long you plan to stay in your home, the current and trending market rates, and how much risk you are willing to take. Compare the advantages and disadvantages of each below. If you have questions, your loan officer can help you choose the best loan option for you and your family!

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Fixed Rate Mortgages

Advantages

  • Rates & payments remain constant for the life of the loan, even if rates are on the rise

  • Simpler to understand & easier to prepare your monthly budget

  • If you plan on staying in your home, you’ll know the exact payoff amount upfront

Disadvantages

  • If rates go down, you’ll have to refinance to take advantage of the new lower rate

  • No early-on payment or rate break, which may lead to a higher cost in the beginning

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Adjustable Rate Mortgages (ARM)

Advantages

  • Typically a lower rate & payment early on in the loan term

  • If rates fall, so will your payment, without the need to refinance

  • If you don’t plan on living in one place for very long, you may never see an adjustment

Disadvantages

  • Rates & payments can rise significantly over the life of the loan

  • Sometimes, the first adjustment can be quite significant

  • ARMs may be difficult to understand