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

In Washington, the main difference between fixed-rate and adjustable-rate mortgages (ARMs) is how the interest rate is determined. A fixed-rate mortgage is when the interest rate is the same throughout the entire life of the loan. This rate is determined by the market when the loan is originated and cannot change. The payment amount will remain the same, so this type of mortgage is appealing to people who need a stable budget. An adjustable-rate mortgage is when the interest rate is adjusted periodically, according to the terms of the loan. The rate is based on an index of some kind, such as the Prime Rate, LIBOR or Treasury Bill Rate. When the interest rate adjusts, the payment amount will also change, which can cause uncertainty. However, the adjustable-rate mortgage usually has a lower initial interest rate than the fixed-rate mortgage, giving the borrower some potential savings in the short term. It is important to consider both types of mortgages and the long-term effects when selecting the best loan for you. Factors such as your income, debt and financial goals should be taken into consideration. Be sure to speak with a professional mortgage lender to determine the best loan for you.

Related FAQs

What is the difference between pre-qualifying and pre-approval for a mortgage?
What are the benefits of a mortgage?
What documents do I need to apply for a mortgage?
What is an adjustable rate mortgage (ARM)?
What is a VA mortgage?
What is the mortgage application process?
What is the difference between a fixed rate and an adjustable rate mortgage?
Does the interest rate on my mortgage change over time?
What are the differences between a lender and a mortgage servicer?
What are the different types of mortgages available?

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

Related FAQs

Related Blog Posts