Adjustable versus fixed loans

	Shopping for a mortgage loan? We'd be thrilled to discuss our mortgage offerings! Call us at 2039758552. Want to get started? Apply Here.

A fixed-rate loan features a fixed payment for the entire duration of your loan. Your property taxes may go up (or rarely, down), and your insurance rates might vary as well. But generally payment amounts on a fixed-rate mortgage will increase very little.

Early in a fixed-rate loan, a large percentage of your monthly payment goes toward interest, and a significantly smaller part goes to principal. That reverses itself as the loan ages.

Borrowers can choose a fixed-rate loan in order to lock in a low interest rate. Borrowers select fixed-rate loans when interest rates are low and they wish to lock in at this lower rate. For homeowners who have an ARM now, refinancing with a fixed-rate loan can offer greater monthly payment stability. If you have an Adjustable Rate Mortgage (ARM) now, we'll be glad to help you lock in a fixed-rate at a favorable rate. Call Capital Faith Financial Services LLC. at 2039758552 for details.

Adjustable Rate Mortgages — ARMs, as we called them above — come in even more varieties. Generally, the interest rates on ARMs are determined by an outside index. A few of these are: the 6-month CD rate, the one-year Treasury Security rate, the Federal Home Loan Bank's 11th District Cost of Funds Index (COFI), or others.

Most programs feature a cap that protects borrowers from sudden monthly payment increases. Your ARM may feature a cap on interest rate increases over the course of a year. For example: no more than two percent per year, even though the index the rate is based on goes up by more than two percent. Sometimes an ARM features a "payment cap" that ensures that your payment can't increase beyond a certain amount over the course of a given year. Additionally, almost all ARMs have a "lifetime cap" — your rate won't exceed the cap amount.

ARMs most often have the lowest rates at the beginning. They provide that interest rate for an initial period that varies greatly. You may hear people talking about "3/1 ARMs" or "5/1 ARMs". For these loans, the introductory rate is fixed for three or five years. It then adjusts every year. These kinds of loans are fixed for a certain number of years (3 or 5), then adjust. These loans are best for people who anticipate moving in three or five years. These types of ARMs are best for people who plan to move before the loan adjusts.

You might choose an Adjustable Rate Mortgage to get a lower introductory interest rate and count on moving, refinancing or absorbing the higher rate after the initial rate goes up. ARMs are risky when property values go down and borrowers can't sell or refinance.

Have questions about mortgage loans? Call us at 2039758552. It's our job to answer these questions and many others, so we're happy to help!