adjustable-rate mortgages versus fixed-rate mortgages

If you have ever wanted to understand better the adjustable-rate mortgages versus fixed-rate mortgages, you don’t need to look any further than their respective names. The names tell you what each of the mortgages is, but it’s up to you to determine which one best fits your needs. Interest rates on fixed-rate mortgages stay the same throughout the life of your loan.

If you know you are keeping your home for a while, these are usually the optimal mortgages for you to consider. You also get a fixed-rate for an adjustable-rate mortgage (ARM) but only for a pre-determined timeframe. After the pre-determined timeframe passes, your ARM adjusts periodically throughout the life of the loan.

Which type of mortgage is better for you if you want to buy a home in the Pacific Northwest? It always depends on the length of time you’ll be in the home, your finances, savings, and a host of other financial considerations. Please keep reading learn all you need to know about adjustable-rate mortgages versus fixed-rate mortgages.

Adjustable-Rate Mortgages versus Fixed-Rate Mortgages

The adjustable-rate mortgages versus fixed-rate mortgages have a lot of truths and myths attached to them. Many myths are addressed below with facts and information for a better understanding. With an adjustable-rate mortgage, you can get a lower initial rate on your home loan than you can with a fixed-rate mortgage.

The ARMS initial rate is a lower initial rate, and the rate adjusts at a pre-determined time. Because the initial rate is lower than the fixed-rate, it gives you more money to use for your home’s down payment. In general, it’s a great way to reduce how much you have to borrow.

ARMS Have a Higher Overall Interest Rate

But as you pass the ARMS predetermined time frame, you need to pay more interest. ARMS will always have a higher overall interest rate than a fixed-rate mortgage. That makes it a truth that the ARM and fixed-rate mortgage have different initial rates.

It’s also true that both of them have different overall interest rates.

Interest Rate and APR Are the Same Things

Many people confuse the terms interest rate and APR. The terms are not interchangeable and are very different from one another. Interest rate is for a period of time where you pay a percentage of your loan amount through the interest rate on the money you borrowed. APR stands for Annual Percentage Rate.

The APR figure is calculated by adding up all the additional fees other than interest into your total cost of borrowing money.

Fixed-Rate versus Variable Rate Mortgage

Many people think the interest rate for both the fixed-rate mortgage and the variable rate mortgage is the same. This can be true, but there can also be a difference in the rates. You can change your monthly payment in a variable rate mortgage each time it’s due by adjusting your rate.

That’s because, in a variable rate mortgage, your payment period is continuous and not monthly. You have to pay additional taxes on variable rate mortgages that you don’t have to pay for fixed-rate mortgages. Often if you have the budget available, the variable rate mortgage is a viable option to consider.

In What Situation Might You Prefer a Variable Rate Mortgage?

As listed above, the low variable rate mortgage helps you obtain more money to use on your down payment or closing costs. If your investment portfolio is doing well, you can pay larger monthly payments, which help to reduce your overall loan amount. If you’re self-employed, this is a great way to ensure you have a good cash flow available and build equity in your home.

Maybe you had a windfall with a bonus, inheritance, or any unexpected financial gain. It’s a great time to use a variable rate mortgage because you can also pay off your loan faster. There are a couple of situational disadvantages you want to be aware of with variable-rate mortgages.

You have to pay taxes on the interest at a higher rate than a fixed-rate mortgage loan. Finally, some people think a variable rate mortgage can be easier to get into than it is to get out of.

Mortgage Calculator

There are many mortgage calculators available to you online if you want to figure out how much you can borrow. You can also determine the monthly payment you will be required to make. This means you can plug in your down payment and input what loan term you have to determine your mortgage.

The mortgage calculator will use your interest rate too. The mortgage calculator uses your interest rate to help you determine monthly payments. It will even provide you with your monthly payment timeframe.

Mortgage calculators usually have a help button somewhere in their online format. Press any of the mortgage calculator assistance keys, and you will get a step-by-step guide through its features. It’s time because the Pacific Northwest offers so many things no other area of the country offers in beauty, nature, unspoiled environments, and friendly communities.

Find Your Home in Oregon or Washington

If you’re interested in purchasing a home in Oregon or Washington, there is a mortgage broker unlike any other. The Tammi Lindley Team is committed to helping home seekers and sellers live their dream in Portland and other Pacific Northwest locations. If the time has come for you to find the home you’ve always wanted in a charming and vibrant community that offers everything you need, the Tammi Lindley Team is a good place to start.

The Tammi Lindley Team offers you the very best mortgage brokering and real estate consultation. The Tammi Lindley Team knows whether adjustable-rate mortgages versus fixed-rate mortgages will fit your finances best. This team is committed to meeting your financial expectations while finding a home situated in a serene and beautiful area.

Please reach out to the Tammi Lindley Team today. So you can take your first step down the path to finding your dream home tomorrow.

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