Difference
What is the Difference Between Adjustable-Rate and Fixed-Rate Mortgages?
The difference between fixed-rate and adjustable-rate mortgages is exactly what it sounds like. With a fixed-rate mortgage, your interest rate remains fixed. While the interest rate for an adjustable-rate is adjustable. This sounds painfully obvious, but there are pros and cons to both types of loans, so let’s dig a little deeper.
The Adjustable-Rate Mortgage
The Adjustable-rate mortgage often referred to as the ARM, offers a lower interest rate than fixed-rate loans during the first 5 to 7 years. After this initial period, the monthly payments could rise substantially. This may be a good option if you don’t plan on living in a home for long or if you will make more money in the future. Avoid any surprises and ask your lender to calculate the maximum monthly payment that could be due. Cap rates do vary so be sure to shop around.
