Fixed Rate vs Arm Mortgage

We try and stay healthy and fit in our everyday
lives so why wouldn’t your mortgage fitness be important
as well? Learn more about mortgage terms, loan programs,
and steps during the loan process for purchasing or refinancing your home. Come on let’s get mortgage fit! Hi I’m Courtney Lynch from New American Funding. Today we’re going to talk about two different
loan options: the fixed rate mortgage and the adjustable rate mortgage also known as
ARM. Have you ever wondered what the difference
between these two mortgages is? Well you’re not alone. Today we’re going to cover the basics so you’re
familiar with each and you know how to choose which option is best for you. So let’s get started. With the fixed-rate mortgage, you keep the
same interest rate for the life of the loan. In other words, your interest rate is fixed
when you take out your loan and it will not change. It stays the same whether your loan is 10,
20 or 30 years. There are lots of benefits to a fixed rate
mortgage. It offers you the security of knowing what
your monthly mortgage payment is and it’s not going to change. There aren’t any surprises even if there are changes in the economy. That means you can better plan for your financial
future like sending your kids off to college, taking that vacation, or building your savings
account. On the other hand with an adjustable rate
mortgage the interest rate may go up or down. The initial rate starts lower but it can adjust
periodically. And when the interest rate drops your payment
usually goes down. It all depends on the terms of the loan. Your loan starts with an initial interest
rate and payment amount that typically lasts for a limited period such as one month or
5 years. After the initial period is over your interest
rate will adjust periodically like every month, every quarter or every year depending on your
loan terms. Most adjustable rate mortgages limit how much
your interest rate can increase with each adjustment and will usually put a cap on how
high your interest rate can go over the life of the loan. So with an adjustable rate mortgage it’s a
trade-off you get a lower initial rate in the beginning in exchange for taking on more
risk in the long run. If you’re planning to stay in your home long
term then a fixed rate mortgage might be the best way to go. But if you’re planning to stay
less than 5 years then an adjustable rate mortgage might work better. Your New American Funding loan officer will
be able to guide you through the process of identifying which option is right for your
financial future. Thanks for watching this episode of Get Mortgage
Fit and keep watching our series to improve your mortgage health.

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