Which option is better for you: a fixed or adjustable-rate mortgage?
Deciding between a fixed-rate and adjustable-rate mortgage is one of the first steps you’ll take in the mortgage process. Which is right for you depends on your monthly budget, how long you plan to live in your home, and how quickly you want to pay off your home loan.
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Homebuyers who choose a fixed-rate mortgage enjoy the comfort and predictability of knowing monthly payments won’t change. Two common types of fixed-rate mortgages include the 30-year and the 15-year mortgage, but other terms can range from 8 years to 30 years.
An adjustable-rate mortgage, or ARM, typically starts with a lower interest rate than a fixed-rate mortgage. However, your interest rate and payments are periodically adjusted up or down as the index changes. In the event these rates change, you may refinance your ARM to a fixed-rate mortgage to avoid fluctuating monthly payments.
With this tool, you can easily compare the cost of a fixed-rate and adjustable-rate mortgage over time. Simply enter the respective interest rates and terms for each loan.
Begin by entering basic home information, including purchase price, down payment, and expected years in home.
Enter prospective fixed-rate loan details, including term, interest rate, origination charge, discount points, and other settlement services.
The origination charge is generally between 0.5% and 1% of your mortgage loan, but check with your mortgage specialist to confirm. For Other Settlement Services, consider the cost of an appraisal, credit report, flood certification, tax service, lender and owner’s title insurance, and government recording fees.
For your prospective adjustable-rate loan, select the term, interest rate, origination charge, discount points, and other settlement services. See above for more information on interest rates, origination charges, and other settlement services.
To determine adjustment terms, we recommend that you speak with a mortgage specialist to learn more. Together, you can walk through the current ARM rates and terms.
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