Life is full of choices.
The type of mortgage you take out can make a great difference to you.
Paper or plastic? Car or SUV? Rent or buy? Perhaps one of the biggest decisions you will ever make is whether to take a fixed-rate or adjustable rate mortgage.
So what exactly is the difference between these two types of mortgages? With a fixed rate mortgage, your payments are the same for the life of the loan.
Regardless of inflation or other economic factors, your mortgage payment will never change. Many people choose a fixed rate mortgage because of the stability it offers.
With an adjustable rate mortgage, ARM, your payments will vary depending on the interest rate. Lenders favor this type of mortgage because the interest rate of the mortgage changes based on other economic factors.
Even with ARMs, there is an initial period in which the interest rate is fixed. After that period the interest rate will adjust a periodic basis, usually annually.
In nearly all cases, the initial principal and interest payments on an adjustable rate mortgage are lower than that of a fixed rate mortgage. This is the aspect of the ARM that leads many...
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