When deciding between loan options, one of the first things to consider is whether you want a fixed or adjusted mortgage. An adjusted or adjustable rate mortgage can be an excellent choice for certain financial situations, while fixed rate mortgages might provide more advantages.
To help you decide which option works best for you, here are some more facts about these two mortgage types:
With adjustable rate mortgages, the interest rate varies over the life of the loan. Interest rates for ARMs typically start off lower than those in a comparable fixed-rate loan and rise as they accumulate over time.
Adjustable rate mortgages typically have a period for which interest rates remain constant, after which interest rates adjust on a prearranged periodic basis. Fixed rate periods can be anywhere from 1 to 10 years long.
The interest rate for a fixed-rate mortgage will remain unchanged over its entire lifetime. This means your total monthly payments are the same every time, which can make budgeting simpler for homeowners.
In addition to easier budgeting, they offer protection from outside economic factors like dramatic changes in mortgage interest rates.
When it comes to choosing a mortgage, there are multiple personal and financial realities to weigh. While your individual financial situation might fluctuate over time, interest rates can also rise or fall based on broader economic factors.
A fixed rate mortgage will help you create a rock solid budget, no matter how interest rates might change over time. However, an adjustable rate mortgage might be easier to qualify for because of their requirements, since the interest rates are not fixed and the lender may increase them as the market changes.
Keep these factors in mind and discuss your options with a financial advisor to determine the best possible choice for your financial needs.
Stephanie Englund Siegel is a successful Realtor with Compass. She was born and raised in the Northwest suburbs of Chicago. Living in the city for over almost 20 years has given Stephanie the in depth knowledge of many neighborhoods. Stephanie feels that Chicago's culturally diverse residents are what contribute to the richness and quality of life in its neighborhoods. Before joining the Compass Family, she worked as a paralegal for a real estate attorney which gave her the knowledge about every step in a transaction. From the very beginning of the process all the way to the end, Stephanie is dedicated to her clients and the success of the transaction so both parties get a win-win. Stephanie serves real estate needs in the following neighborhoods: Lincoln Park, Gold Coast, Streeterville, Loop, West Loop, South Loop, Lakeview, River north, Lincoln Square, Wrigleyville, Ravenswood, Greater Chicago area and surrounding suburbs.
