Fixed VS Adjustable Rate


One of the first choices you will need to make in the mortgage process is whether you want a fixed-rate or an adjustable-rate mortgage loan. The bulk of loans will fit into one of these two categories. However, there is a third option that will allow you to "hybrid" the two.

Adjustable-rate mortgage (ARM)

 The interest rate of the mortgage adjusts periodically based on market conditions. For example, your payment will go up if rates go up and down if rates go down. 

Fixed-rate mortgages

Unlike an adjustable-rate mortgage, the interest rate is set at the time you take out the loan and will not change. Fixed-rate home loans can be 10 years, 15 years or 30 years fixed. 30-year fixed is the most common because it allows your mortgage payment to be the lowest.

Hybrid ARM

Features an initial fixed interest rate for a certain amount of time and then becomes an adjustable-rate for the remainder of the term. Standard terms are 3, 5, 7 or 10 years.