What is the difference between fixed-rate and adjustable-rate mortgages?

Fixed-rate mortgages and adjustable-rate mortgages are two different types of home loan options in Kansas. A fixed-rate mortgage is a home loan in which the interest rate remains the same throughout the life of the loan. Your monthly mortgage payments are determined by the amount borrowed, the interest rate, and the length of the loan. The interest rate on a fixed-rate mortgage generally does not change over the life of the loan. On the other hand, an adjustable-rate mortgage (ARM) has an interest rate that changes periodically. The interest rate on an ARM is tied to an economic index such as the prime rate or LIBOR. The index rate and your margin, or the amount the lender adds to the index rate to determine your interest rate, are fixed for the initial period. After that, the interest rate can adjust up or down, depending on the index rate and your lender’s margin. The main difference between a fixed-rate mortgage and an adjustable-rate mortgage is the predictability of payments. With a fixed-rate mortgage, the payment is fixed for the life of the loan and it does not change. With an adjustable-rate mortgage, the payment can change over time, as the index rate and margin change. This means borrowers must be prepared for their monthly payment to change without warning.

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What is the difference between fixed-rate and adjustable-rate mortgages?

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