|
|
Which is better, a fixed rate or a variable rate?
Home » Real Estate » Obtaining Financing for a House » Which is better, a fixed rate or a variable rate?The chief advantage of a fixed rate is that it's predictable. You know exactly what you must pay every month, and it will never change. The main disadvantage to a fixed rate loan is that it has a higher interest rate compared to initial rates of adjustable-rate mortgages - usually 2 to 3 percentage points higher.
An adjustable rate mortgage, known as an ARM, has an interest rate that changes at specified intervals, for example, every year, every three years or every five years. Which way the interest rate heads depends on what the rate is tied to, mostly commonly, the rates on treasury bills.
Sources:
http://www.ehow.com/how_8126_home-loan.html
http://www.realestateabc.com/homeguide/Escrow.htm
http://www.nwpacificmortgage.com/mortgagelender.html
Related Obtaining Financing for a House Articles
- What is pre-approval and prequalification?
- How much money should I borrow for a house?
- How do I find a reputable lender?
- Should I make a big down payment or a small down payment?
- How long of loan should I get?
- Which is better, a fixed rate or a variable rate?