Fixed-Rate and Adjustable-Rate Mortgages

These are two of the most popular loan types for buying a home or refinancing your mortgage (including cash-out refinances). Both options are available for conventional conforming loan amounts, jumbo (non-conforming) loan amounts, and FHA or VA programs.

Fixed-Rate Mortgage

Features

  • Your interest rate and monthly principal and interest (P&I) payments remain the same for the life of your loan.
  • Available in a variety of loan term options.
  • You may be able to add extra features such as temporary buydowns.

Benefits

  • Predictable monthly P&I payments allow you to budget more easily.
  • Protection from rising interest rates for the life of the loan, no matter how high interest rates go.
  • May be a good choice if you plan to stay in your home for a long time.

Considerations

  • The overall interest you pay is higher on a longer-term loan than on a shorter-term loan.
  • On a shorter-term loan, the monthly P&I payment is typically higher than on a longer-term loan.

Adjustable-Rate Mortgage

Features

  • Your interest rate and monthly principal and interest (P&I) payments remain the same for an initial period of 5, 7, or 10 years, then adjust annually.
  • Loans available in a variety of longer terms.
  • Includes interest rate cap that set a limit on how high your interest rate can go.

Benefits

  • Typically ARMs have a lower initial interest rate than on a fixed-rate mortgage.
  • The interest rate cap limits the maximum amount your P&I payment may increase at each interest rate adjustment and over the life of the loan.
  • May provide flexibility if you expect future income growth or if you plan to move or refinance within a few years.

Considerations

  • Monthly principal and interest payments may increase when the interest rate adjusts.
  • Your monthly principal and interest payments may change every year after the initial fixed period is over.

Current Interest Rate Graph

 

Talk to a local mortgage expert: Call (877) 275-1762 or email customer.support@phmloans.com

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