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Fixed Versus Adjustable


A traditional fixed rate loan is the safest and most conservative option designed for those with the long term in mind.  The interest rate and loan payment will be fixed throughout the life of the loan.  According to Fannie Mae statistics, 88% of loan originations are traditional fixed rate loans.  Since a fixed rate loan offers more stability, a traditional fixed interest rate loan will generally be slightly higher than an adjustable rate mortgage. 


Adjustable rate mortgages are fixed for a predetermined amount of time and then become adjustable once the fixed period has expired.  Adjustable rate loans offer lower interest rates and payments during the initial fixed periods and then adjust to higher market rates once the initial fixed period has expired.  These types of loans are designed for those who have more short term plans for the loan. 


For example: if you have plans to either move or refinance within a few years, an adjustable rate mortgage may be the right loan for you.  The lower initial interest rate offers lower monthly payments, but the tradeoff is the increased risk of higher payments and interest rates once the loan enters its adjustable period. 


Click Get Rates to compare a fixed versus an adjustable rate mortgage.





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