One of the first choices a homebuyer will need to make is whether you want a Fixed Rate vs Adjustable Rate mortgage. The bulk of loans will fit into one of these two categories, however, there is a third option that will allow you to “hybrid” the two. Kara Davis of Crew Lending provides mortgages in Westlake, Sulphur, and Lake Charles as well as the whole state of Louisiana. Please call Kara Davis of Crew Lending to discuss what loan option best meets your needs.
What is a Fixed Rate vs Adjustable Rate Mortgage?
With a standard Fixed Rate mortgage loan, your monthly principal and interest payment is set when you take out the loan; the principal and interest payment will not change over the life of the loan. With an Adjustable Rate mortgage, your monthly payment could change.
Many Adjustable Rate mortgages will start at a lower interest rate than a Fixed Rate mortgage. This initial rate may stay the same for months or years. When this introductory period is over, however, your interest rate will change and the amount of your payment will likely go up.
With an Adjustable Rate mortgage loan part of the interest you pay will be tied to a broader measure of interest rates, called an index. Your payment goes up when this index of interest rates moves higher. When the index declines, sometimes your payment may go down (but that is not true for all ARMs.) Your mortgage payment could go up even if the interest rate index doesn’t go up because many ARMs will limit the amount of each adjustment. ARMs may set a maximum, or “cap” on how high your interest rate can go over the life of the loan. Some ARMs also limit how low your interest rate can go.
What Terms are Offered in Fixed Rate vs Adjustable Rate Mortgage?
Fixed Rate mortgage loan terms can be 10 years, 15 years, 20 years of 30 years. A 30 year Fixed Rate is the most common because it allows your mortgage payment to be the lowest. With an Adjustable Rate mortgage (ARM) the interest rate of the mortgage adjusts periodically based on market conditions. Standard terms for an Adjustable Rate mortgage are 3 years, 5 years, 7 years, or 10 years. A Hybrid Adjustable Rate mortgage features an initial fixed interest rate for a certain amount of time and then becomes an adjustable-rate for the remainder of the term.
Kara Davis is a Trusted Lender
Kara Davis of Crew Lending is happy to help her clients with all their residential lending needs (Fixed Rate vs Adjustable Rate mortgage) in Sulphur, Westlake, Lake Charles and the entirety of Louisiana. For those looking to purchase your first home, your last home or anything in between, Kara Davis can help! Click here or call 337-842-0115 with any questions or to get qualified!