Fixed & Adjustable Rate Mortgages
When it comes to mortgages, the first thing you need to know is the difference between fixed and adjustable rate mortgages.
With fixed rate mortgages, you lock in at one rate that stays the same as long as you have your mortgage. In turn, your monthly principal and interest payment remains the same throughout the life of the loan as well.
With an adjustable rate mortgage (ARM), your rate — and your monthly principal and interest payment —changes periodically after a certain fixed period to reflect changes in the market rate.
With both types of mortgages, taxes and insurance will affect your payments each year as your escrow account is recalculated.These figures will be in addition to the monthly principal and interest payments, unless escrows are waived.
Variations of Fixed and Adjustable Rate Mortgages
While fixed and adjustable rate are the two primary categories of mortgages, there are certainly variations. Usually the differences are the duration of the mortgage term, and how long the rate is fixed before adjusting in the case of an ARM loan. Here are some examples:
15 Year Fixed Rate Mortgage
- Pay off loan over 15 years
- Monthly principal and interest payment remains the same throughout loan
- Rate typically lower than 30-year mortgage because term is shorter
30 Year Fixed Rate Mortgage
- Pay off loan over 30 years
- Monthly principal and interest payment remains the same throughout term of loan
- Rate slightly higher than 15 year loan, but the monthly principal and interest payment is lower because the term is longer
5/1 Adjustable Rate Mortgage
- Interest rate is fixed for the first five years
- After five years, rate becomes adjustable and changes annually based on an underlying index and margin
- Principal and interest payment would remain the same for first five years
- After five years, this portion of the payment would change based on rate change
Our fixed and adjustable rate programs provide options for the financing of primary residences, secondary residences, single-family homes and condominiums.
Rest assured your BBVA Compass banker will help you compare the types of mortgages, consider your specific situation, and determine which loan is right for you.
Mortgages are subject to loan program eligibility and approval, including credit approval.
