The Difference Between Fixed and Adjustable Mortgage Rates

We were asked the other day what the difference is between a fixed-rate mortgage and an adjustable-rate mortgage, so I thought I would take a moment this morning to clarify.

A fixed-rate mortgage means that the mortgage rate on your newly purchased home will never change.  If you purchased a home tomorrow at four percent, the loan rate would remain four percent through the life of the loan, and this is one of the best times in real estate history for securing a fixed-rate loan.  If you were to look at an amortization schedule you would see that the longer you pay on a fixed-rate mortgage, the more interest you pay down.  In other words, the longer you pay the greater percentage of your monthly payment goes to reduce the principal.

On an adjustable-rate mortgage, the load will adjust periodically according to the market rates from year to year.  That also means that your mortgage payment can change.  Adjustable-rate mortgages can look quite enticing early on, but turn into something less than enticing in ten years if the market is not favorable.

Choosing between the two mortgages is a personal preference based on many factors.  Are you going to be staying in the home for the life of the contract?  How will the market react to outside influences during the next ten years?  What is the state of the economy?

A good real estate agent can help you navigate these waters, as can a good loan officer.  This is one of those cases during an athlete relocation when you really do need to rely on the professionals for good counsel.

Sports Relocation, Inc. Sports Relocation, Inc assist players/coaches of all professional sports leagues including the NBA, WNBA, NFL, MLB, NHL, and entertainers relocate nationwide by servicing their Real Estate & Relocation needs. Ikem Chukumerije is licensed to practice real estate in New York, California, Nevada, Florida, & Georgia. Sports Relocation, Inc operates nationwide and provides elite athlete relocation services in all 50 states and internationally.