Posted on: 07th Oct, 2011 07:13 am
A fixed rate mortgage means that you do not have to worry about interest rate fluctuations in the future on your home. This means that the mortgage has a fixed interest rate that will remain the same regardless of whether market interest rates rise or fall. The rate is "locked in."
A variable rate Mortgage is the opposite of this. A mortgage with an adjustable interest rate changes with the market interest rate. The mortgage holder is protected by a ceiling, a maximum interest rate that is paid, which might be reset annually. Adjustable Rate Mortgages (ARM's) usually start with better rates than fixed rate mortgages to compensate for the higher interest rate the borrower may pay in the future.
Would the community agree that a fixed rate is better than an ARM, or vise versa?
A variable rate Mortgage is the opposite of this. A mortgage with an adjustable interest rate changes with the market interest rate. The mortgage holder is protected by a ceiling, a maximum interest rate that is paid, which might be reset annually. Adjustable Rate Mortgages (ARM's) usually start with better rates than fixed rate mortgages to compensate for the higher interest rate the borrower may pay in the future.
Would the community agree that a fixed rate is better than an ARM, or vise versa?
If the owner is living in the house more than one or two years longer than the fixed term of the ARM, the fixed rate is probably better choice.
I personally feel that fixed rate is a better option than ARM because, the rate will remain same though out the loan term.The rates won't increase with the increase in the market rates.
Thanks for the replies, definitely will help someone coming across this.