What is Fixed Versus Adjustable Rate?

What are the benefits of fixed versus an adjustable rate mortgage?

Fixed Rate

Your interest rate and the principal you're paying off stay the same for the entire term of the loan. That stability makes it the safest option, so you won't be surprised to hear that we consider these types the ideal home loans for first time homebuyers. Learn more at our Home Buyer Seminar.

• Advantages

  • Your payment is stable

  • The interest rate never increases

  • The loan is paid over a set number of years

• Disadvantage 

  • The interest may be higher than with other types of loans

Adjustable Rate

Rates can adjust based on the market. There's usually a limit on how much it can go up or down each year called a “cap.”  

• Advantages

  • A lower interest rate and monthly payment until the initial period ends

  • You might qualify for a bigger loan

  • Good for short term hold (3/1 ARM, 5/1 ARM, etc)

• Disadvantages

  • If interest rates go up, so will your payments

  • There could come a time when you can't afford the payments anymore