What is the difference between a fixed-rate and an adjustable-rate mortgage?

In Delaware, a fixed-rate mortgage is a loan that has an interest rate that stays the same over the life of the loan. This means that your monthly payments are consistent, as the interest will not change. An adjustable-rate mortgage (ARM) is a loan with an interest rate that can change over time. ARMs will often start out with a lower interest rate than a fixed-rate mortgage, but the rate can adjust after an initial period, meaning that the monthly payment may increase over time. One of the main differences between a fixed-rate and an adjustable-rate mortgage is the amount of risk associated with each loan. With a fixed-rate loan, the interest rate is stable, so the borrower knows exactly what to expect in terms of their monthly payments. However, with an adjustable-rate mortgage, the interest rate can fluctuate, which means that there is more risk involved. The lender will likely require the borrower to have additional funds available in case the interest rate increases significantly. In some cases, an adjustable-rate mortgage can be a better option than a fixed-rate loan. The initial interest rate may be lower, which can lower monthly payments, and the loan may be easier to qualify for. However, borrowers should discuss the potential risks associated with an ARM before choosing this type of loan. It is important to understand the terms of the loan and the potential for changes, so you can make an informed decision that is best for your financial needs.

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What is the difference between a fixed-rate and an adjustable-rate mortgage?

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