Ready, Set, Battle: Fixed Vs. Adjustable Rate Mortgage
CMS Mortgage Solutions Inc.
CMS Mortgage Solutions Inc.
Published on August 18, 2022
Ready, Set, Battle: Fixed Vs. Adjustable Rate Mortgage - CMS Mortgage Solutions

Ready, Set, Battle: Fixed Vs. Adjustable Rate Mortgage

Mortgages can be a confusing topic, but it’s important to understand the differences between fixed and adjustable rate mortgages if you’re looking to buy a home. With a fixed rate mortgage, you will have the same interest rate and monthly payment for the entire life of the loan. An adjustable rate mortgage, on the other hand, has an interest rate that can change over time-usually every year. In this article, we’ll break down the differences between these two types of mortgages so that you can make an informed decision about which is right for you.

Fixed Rate Mortgages

A Fixed Rate Mortgage (FRM) is a mortgage with an interest rate that remains the same for the entire life of the loan. This can be helpful in budgeting and planning for the future, as you know exactly what your costs will be.

How does a FRM work?

Verify my mortgage eligibility (Sep 30th, 2022)
With a FRM, the interest rate and monthly payment are fixed for the life of the loan. This means that you’ll know exactly how much your mortgage will cost every month, making it easier to budget for the future.

Advantages of a FRM

The main advantage of a FRM is that you can predict your future costs with certainty. This can make budgeting and long-term planning much easier, as you’ll always know exactly how much your mortgage will cost. Additionally, if interest rates rise in the future, you’ll be protected from having to make higher payments.

Disadvantages of a FRM

The main disadvantage of a FRM is that you may end up paying more than you would with an adjustable rate mortgage. This is because the interest rate is fixed for the life of the loan, even if rates drop in the future.

When is a FRM the best option?

Verify my mortgage eligibility (Sep 30th, 2022)
A FRM is typically the best option if you plan on staying in your home for a long period of time and you want to know exactly how much your mortgage will cost every month. Additionally, if interest rates are currently low, it may be a good idea to lock in a low rate with a FRM.

Adjustable Rate Mortgages

An Adjustable Rate Mortgage (ARM) is a mortgage with an interest rate that can change over time-usually every year. This could lead to higher or lower monthly payments, so it’s important to understand how this could impact your budget.

How does an ARM work?

With an ARM, the interest rate is fixed for a period of time-usually 5, 7, or 10 years-and then it will adjust annually based on market conditions. This means that your monthly payments could go up or down over time, depending on interest rates.

ARM Loan Banner

Advantages of an ARM

Verify my mortgage eligibility (Sep 30th, 2022)
The main advantage of an ARM is that you may have lower monthly payments during the initial fixed-rate period. This can give you some breathing room in your budget and allow you to qualify for a larger loan. Additionally, if interest rates drop in the future, your payments will also go down.

Disadvantages of an ARM

The main disadvantage of an ARM is that your monthly payments could increase if interest rates rise. This could make it difficult to budget for the future and may even lead to default if you can’t afford the higher payments. Additionally, ARMs typically have lower initial interest rates than FRMs, so you may end up paying more in the long run.

When is an ARM the best option?

An ARM is typically the best option if you plan on selling your home before the interest rate adjusts. This way, you’ll only have to make lower monthly payments for a few years, and you won’t have to worry about the possibility of higher payments in the future. Additionally, if you expect interest rates to drop in the future, an ARM could be a good option.
Both fixed rate mortgages and adjustable rate mortgages have their own advantages and disadvantages. When deciding which type of mortgage is right for you, it’s important to understand how each one works and what could happen if interest rates rise or fall.
It’s important to speak to an experienced loan officer to understand which type of mortgage is right for you. An expert can help you weigh the pros and cons of each option and decide which one is best for your needs.
Fixed rate mortgages are a good choice if you want to know exactly how much your mortgage will cost every month. They can be helpful in budgeting and long-term planning, and they offer protection against rising interest rates. Adjustable rate mortgages have lower monthly payments during the initial fixed-rate period, which can give you some breathing room in your budget. They’re a good choice if you expect interest rates to drop in the future.

Show me today's rates (Sep 30th, 2022)
CMS Mortgage Solutions Inc.
CMS Mortgage Solutions Inc. Virginia Beach
Click to Call or Text:
(757) 558-2603