1 – Should I get a fixed- or adjustable-rate mortgage?
Mortgages generally come in two forms: fixed or adjustable rate. Fixed-rate mortgages lock you into a consistent interest rate that you’ll pay over the life of the loan. The part of your mortgage payment that goes toward principal plus interest remains constant throughout the loan term, though insurance, property taxes and other costs may fluctuate.
The interest rate on an adjustable-rate mortgage fluctuates over the life of the loan. An ARM usually begins with an introductory period of 10, seven, five or even one year, during which your interest rate holds steady. After that, your rate changes based on an interest rate index chosen by the bank.
ARMs look good to a lot of homebuyers because they usually offer lower introductory rates. But remember, your rate could go up after your introductory period, so be sure you’re comfortable with the chance your monthly mortgage payment could rise substantially in the future. As you try to figure out how to get the best mortgage rate, Use the terms of the loan to calculate what your payment might look like in different rate scenarios.