Fixed VS Adjustable Rates

 With a fixed-rate loan, your monthly payment doesn't change for the life of your mortgage. The portion that goes to principal (the amount you borrowed) will go up, but your interest payment will go down in the same amount. The property tax and homeowners insurance will increase over time, but in general, payments on fixed rate loans vary little.

Your first few years of payments on a fixed-rate loan are applied primarily toward interest. That reverses itself as the loan ages.

Borrowers can choose a fixed-rate loan in order to lock in a low rate. People choose fixed-rate loans when interest rates are low and they wish to lock in the low rate. If you have an Adjustable Rate Mortgage (ARM) now, refinancing with a fixed-rate loan can provide greater stability in monthly payments. If you have an Adjustable Rate Mortgage (ARM) now, we'd love to assist you in locking a fixed-rate at a good rate. 

Call Denise Skinner FL Mortgage Team at (321) 471-2133 for details.

 There are many types of Adjustable Rate Mortgages. ARMs are normally adjusted twice a year, based on various indexes.

Most ARMs feature this cap, so they can't increase above a specific amount in a given period. Some ARMs can't adjust more than 2% per year, regardless of the underlying interest rate. Your loan may have a "payment cap" that instead of capping the interest directly, caps the amount that the monthly payment can increase in one period. Additionally, almost all ARM programs feature a "lifetime cap" — this means that your interest rate can't go over the capped amount.

ARMs most often have the lowest, most attractive rates at the beginning. They usually provide the lower rate for an initial period that varies greatly. You may hear people talking about "3/1 ARMs" or "5/1 ARMs". In these loans, the initial rate is set for three or five years. After this period it adjusts every year. These kinds of loans are fixed for 3 or 5 years, then adjust. These loans are often best for borrowers who expect to move in three or five years. These types of adjustable rate programs are best for borrowers who plan to sell their house or refinance before the initial lock expires.

You might choose an ARM to get a lower introductory rate and count on moving, refinancing or simply absorbing the higher rate after the introductory rate expires. ARMs can be risky when property values go down and borrowers can't sell or refinance their loan.

Call Denise Skinner FL Mortgage Team at (321) 471-2133 for details.