If you plan to stay in your home for at least seven to 10 years, a fixed-rate mortgage offers stability with your monthly payments. On the other hand, if you don’t plan on staying in your home for a while an Adjustable Rate Mortgage (ARM) could save you big on interest payments.
Let’s go into some detail and provide pros and cons for each type of loan.
What is a Fixed Rate Mortgage?
The rate that is fixed (stays the same) is the interest rate. Fixed-rate mortgages keep the same interest rate over the life of your loan. This means you can expect that your monthly mortgage payments will be consistent month-to-month. Fixed rate loans typically are offered in terms of 15, 20 or 30 years.
Pros and Cons of Fixed Rate Loans
The pros of a fixed rate loan are your monthly principal and interest payments stay the same throughout the life of the loan, making it easier to budget. The cons could mean paying more interest in the long-term and it might take longer to build equity.
What is an Adjustable Rate Mortgage?
Unlike the stability of fixed-rate loans, adjustable-rate mortgages (ARMs) have fluctuating interest rates that can go up or down with market conditions. Many ARM products have a fixed interest rate for a few years before the loan resets to a variable interest rate for the remainder of the term.
Pros and Cons of an Adjustable Rate Mortgage
The pros of an Adjustable Rate Mortgage are during the initial fixed-rate period you can pay lower rates and over the long-term you could spend less on interest. The cons include relying on factors outside of your control, like the real estate market. Your mortgage rates could increase, possibly becoming too unaffordable.
Stonebridge Mortgage Group can help you decide which best fits your goals. We can also help get you pre-approved for a mortgage and help with your real estate loans and other mortgage solutions, both residential and commercial. We serve the greater Portland area and are in Gresham, Oregon.
Call Stonebrige Mortgage at 503.661.5580 for help in choosing the right mortgage loan for you.