Differences between fixed and adjustable loans

A fixed-rate loan features the same payment for the entire duration of the loan. Your property taxes increase, or rarely, decrease, and so might the homeowner's insurance in your monthly payment. For the most part payment amounts for a fixed-rate loan will be very stable.

At the beginning of a a fixed-rate mortgage loan, the majority your payment is applied to interest. As you pay , more of your payment goes toward principal.

You might choose a fixed-rate loan to lock in a low rate. People choose these types of loans when interest rates are low and they wish to lock in this low rate. For homeowners who have an ARM now, refinancing with a fixed-rate loan can offer more stability in monthly payments. If you have an Adjustable Rate Mortgage (ARM) now, we can assist you in locking a fixed-rate at the best rate currently available. Call Home Pointe Mortgage Company at 7702202800 to learn more.

There are many types of Adjustable Rate Mortgages. Generally, the interest for ARMs are determined by an outside index. Some examples of outside indexes are: the 6-month Certificate of Deposit (CD) rate, the 1 year rate on Treasure Securities, the Federal Home Loan Bank's 11th District Cost of Funds Index (COFI), or others.

Most ARM programs feature a "cap" that protects you from sudden increases in monthly payments. Your ARM may feature a cap on how much your interest rate can increase in one period. For example: no more than a couple percent per year, even if the index the rate is based on increases by more than two percent. Sometimes an ARM has a "payment cap" which ensures your payment won't increase beyond a certain amount in a given year. Plus, almost all ARM programs have a "lifetime cap" — the rate can't go over the cap percentage.

ARMs most often have the lowest, most attractive rates at the start of the loan. They usually provide the lower rate for an initial period that varies greatly. You've likely heard of 5/1 or 3/1 ARMs. For these loans, the initial rate is set for three or five years. After this period it adjusts every year. These loans are fixed for 3 or 5 years, then they adjust after the initial period. These loans are usually best for people who anticipate moving in three or five years. These types of ARMs benefit people who will sell their house or refinance before the loan adjusts.

Most people who choose ARMs choose them because they want to get lower introductory rates and do not plan to remain in the house for any longer than the introductory low-rate period. ARMs are risky when property values go down and borrowers are unable to sell their home or refinance their loan.

Have questions about mortgage loans? Call us at 7702202800. It's our job to answer these questions and many others, so we're happy to help!


Home Pointe Mortgage Company

3235 Shallowford Rd. NE,
Chamblee , Georgia 30341