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Choosing Between Fixed and Adjustable-Rate Mortgages

Choosing Between Fixed and Adjustable-Rate Mortgages

Senior Mortgage Advisor
Chad Reidlinger
Published on March 15, 2024
Choosing Between Fixed and Adjustable-Rate Mortgages

Choosing Between Fixed and Adjustable-Rate Mortgages

When it comes to mortgages, one of the first decisions a borrower faces is the type of interest rate: fixed or adjustable. Each has its merits and challenges, and the choice boils down to individual preferences and market conditions.

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Fixed-Rate Mortgages Explained:

Stability is Key: A fixed-rate mortgage means your interest rate remains the same throughout the loan’s life, ensuring consistent monthly payments.

Pros: Predictability makes budgeting easier. Even if market interest rates rise, you're locked in at your predetermined rate.

Cons: Initial interest rates might be higher than adjustable-rate mortgages. If market rates fall, you might end up paying more than necessary.

Verify your mortgage eligibility (Oct 11th, 2024)

Adjustable-Rate Mortgages (ARMs) Unveiled:

A Shifting Landscape: ARMs have interest rates that change periodically based on market conditions. They usually start with a lower rate, which adjusts after a set period.

Pros: Beneficial if you plan to sell or refinance before the adjustable period kicks in. Initial rates are often lower than fixed rates.

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Cons: Monthly payments can increase, sometimes significantly, if interest rates rise.

How to Decide:

Consider Your Timeline: If you’re planning on staying in your home long-term, the predictability of a fixed-rate might be appealing. Short-term residents might benefit from an ARM’s initial lower rates.

Risk Tolerance: Are you comfortable with the possibility of increasing payments, or do you prefer the stability of fixed rates?

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Current Market Conditions: Keep an eye on where interest rates are now and where they’re projected to go.

Choosing between fixed and adjustable-rate mortgages is a balancing act of risk, reward, and personal comfort. Whichever you select, ensure it aligns with your financial goals and homeownership timeline.

Show me today's rates (Oct 11th, 2024)
Senior Mortgage Advisor
Chad Reidlinger Senior Mortgage Advisor
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