Fixed and Adjustable Mortgage Interest Rates - Basic Facts

There are many different types of mortgage loans. Various types of loans make the whole process of home-buying quite intimidating.

Mortgage interest rates influence the borrower’s choice of mortgage to a great extent.

There are two most prevalent mortgage interest rates. These are fixed mortgage interest rate and adjustable mortgage interest rate. This article briefly describes the two types.

• Fixed Mortgage Rates:

In case of 'fixed mortgage rates', the principle and the monthly payments for interest do not change throughout the duration of the loan.

As long as the borrower is in a fixed term agreement, the interest rates remain the same. The advantage of this type of mortgage interest rate is that the borrowers can keep a track of the exact amount of their payments. They can, thus, manage their personal budget easily.

It is advisable to have a fixed-rate mortgage in case the mortgage interest rates are rising. This is because fixed-rate mortgage fixes the current rate and the borrowers need not worry about the future hikes in rates.

Thus, the long-term fixed mortgage rates protect borrowers from any sort of upward fluctuations in mortgage interest rates.

• Adjustable Mortgage Rates:

The mortgage interest rates that are adjusted from time to time on the basis of an index are termed as the ‘adjustable mortgage rates’.

It is advisable to go for adjustable mortgage rates when there is a downward fluctuation in the interest rates.

These mortgage rates change periodically, that is, every one, three, or five years. Therefore, borrowers can easily capitalize on the new rates that are lower than the previous rates.