2006-12-05 10:32:54 · 7 answers · asked by LARGE MARGE 5 in Business & Finance ➔ Renting & Real Estate
A fixed rate is much better it doesn't go any higher no matter how high interest rates goes. If it closes at the current rate of 6%
then 10 years down the road if loans are going at 10% your loan doesn't change. You know up front what you are going to pay every month for the life of the loan.
Adjustable rate mortage is one that goes up or down what ever the current interest rate is somethings it is lower and that's great but what happens if interest rates go up. You could get stuck with a house payment you can't afford. Never get an adjustable that is only good for the bank not for you. that is what the bank will try to talk you in to. But some people lose their house over it.
2006-12-05 10:38:54 · answer #1 · answered by Steven 6 · 1⤊ 0⤋
A fixed rate mortgage is exactly what it sounds like. The rate is locked at one rate for the entire term of the loan. This term can be 5-50 years depending on the loan program selected. In addition, there may be an interest only payment period for the beginning years of the loan even though the rate is fixed for the entire term.
An adjustable rate mortgage has an interest rate which periodically adjusts to coincide with a preselected index interest rate. Most often the the one year treasury bill rate, the 6 month or one year LIBOR rate, or the prime rate. The terms of the adjustments are agreed to at the inception of the loan. After an initial fixed rate period which can last anywhere from 1 month to 10 years depending on the loan terms selected, the rate will adjust to the index rate plus a preselected margin. Historically, these loans have provided lower interest rates for people who only intend to keep the home for a shorter time period. The longer the fixed rate term you select, the higher your starting rate. Because of all the recent increases in short term interest rates, ARM interest rates are not that much better than fixed rates for borrowers who choose ARM programs with initial fixed rates of 3 years or longer.
2006-12-05 12:18:00 · answer #2 · answered by cpruitt62 1 · 0⤊ 0⤋
A fixed rate stays the same for the life of the loan.
An adjustable rate starts out lower but can be increased.
An adjustable rate is great if you don't plan to live there long.
If you have an adjustable rate & your timing is right so you switch to a fixed rate before the adjustable rate becomes to high.
2006-12-05 10:44:15 · answer #3 · answered by Floyd B 5 · 1⤊ 0⤋
basically, a fixed rat is just that, a set rate of int rest over the lifetime of the loan. an adjustable rate loan fluctuates with the prime rate banks pay to borrow. if the prime rate increases so does your rate.
2006-12-05 10:43:46 · answer #4 · answered by jonnydollar1950 3 · 1⤊ 0⤋
ADJUSTABLE rate is cheaper....Advantage, it give you a chance to even lower rate.
Fixed rate more expensive, takes forever to paydown principal. Advantage, it doesnt fluctuate..."safe".
Sorry, guys but I rather keep an eye on my mortgage and save thousands of dollars, than spend thousand of dollars to feel "SAFE".
If you knew that after 5 years,it cost you about hmmm $20,000 more having a fixed rate, woulld you do it? If your answer yes, then FIXED rate IS for you!
Sorry, you're not even trying to get a loan, huh? You just wanted an FYI?
2006-12-05 10:55:29 · answer #5 · answered by ALEGNA 3 · 1⤊ 0⤋
A "Fixed Rate" on a home is a price you will be paying monthly, an "Adjustable Rate" is when your monthly home payment can go up or down. Best bet is "Fixed Rate'
2006-12-05 10:40:42 · answer #6 · answered by Anonymous · 1⤊ 0⤋
I artwork for a super loan lender-- continuously do a fastened fee. I incredibly have seen costs for a 2nd as low as 7.00% hands (Adjustable fee Mortgages) can bounce as extreme as 10, 11, 12%......
2016-12-13 03:32:33 · answer #7 · answered by Anonymous · 0⤊ 0⤋