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Which is Better? Fixed-Rate or Adjustable-Rate Mortgages The answer depends on several factors including your financial situation. Lets take a look at the main differences between the two types of mortgages. Fixed Rate Mortgage Two major components that are needed to compare fixed rate mortgages are the interest rate and the points. Points are fees paid to the lender at the beginning of the mortgage period. They are based on a percentage of the loan. So, one point equals one percent of the loan amount. Therefore, a $100,000 mortgage with 1 >> 5 points would cost $1,500. One lender may offer a lower interest rate than another but the points may be higher resulting in a less attractive loan. The important consideration here is the length of time you plan to hold the mortgage. The longer you plan to keep the mortgage, a higher point with a lower interest rate makes more sense. And, the less time you plan to remain in a home you may be more likely to benefit from low or no points with a higher interest rate. In addition, be sure to ask your lender the total of all fees involved. Lenders can tack on various fees that can add up in a hurry. Some common fees are: * application fee * credit report * property appraisal * title insurance * escrow fees Request an itemized list of all fees in writing so you can compare mortgages fairly. Adjustable Rate Mortgage Selecting the best adjustable rate mortgage (ARM) is basically impossible because there are some unknowns. However, you can look at a few of the loan » Discuss it » Continue Reading »
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