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Which is better for You: A Variable-Rate or a Fixed-Rate Mortgage

rate1If you are applying for a new home mortgage, the most common and traditional type of mortgage most loan applicants apply for is the 30-year fixed rate mortgage. The 30-year fixed rate mortgage allows you to pay for your home over 30 years with equal payments every month. This is one option, but there are actually multiple choices available. There is a variable mortgage rate that may be more advantageous for some applicants. Here are a few points to consider if you are comparing the differences between a fixed rate and a variable rate mortgage.

Lower Initial Interest Raterate3
If you compare the fixed rate and variable rate options, you will find that the variable rates start at a lower rate. The mortgage payment amount is influenced by the interest rate. Because of this, you will benefit fromĀ a

lower initial mortgage payment with a variable rate. It important to understand that the interest rate on the variable rate will adjust periodically over the life of the loan. What this means is that your mortgage payment will also adjust when your interest rate does.

Managing a Rate Adjustment
rate2With a fixed rate mortgage the true benefit is being able to control your monthly budget and manage your funds. Your mortgage payment maybe one of your largest expenses in your monthly budget that you have. If you have a tight budget, an increase in the interest rate on a variable rate and therefore your mortgage payment may be difficult for you to bear. In some cases a higher rate may go beyond what some home owners can afford to endure. As your interest rate goes up your mortgage payment will also rise. If you can afford that payment, then you may want to look at a variable rate mortgage.

If you are in the process of applying for a mortgage, it is important to consider all of the options and carefully understand the key differences between them. Talk with mortgage lenders in detail so you can get more information about the options available to you. This will help you make a better decision about what is the best plan for your budget and for your future as a homeowner.

moo thorpe headshotWhether you are selling your home, or buying a home, I can help you with your endeavor. Please contact me at 505.780.0310, or email me at moo@moothorpe.com and I will be happy to assist you.


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