Buying a home is complex and even scary, especially if you are a first-time buyer. One confusing part of house shopping for buyers is the difference between different types of loans. Fixed-rate and adjustable-rate mortgages are two of the most common loans.
Each mortgage type appeals to buyers with different needs. You should know the pros and cons of each before making a decision.
Fixed-Rate Mortgages
Fixed-rate mortgages lock in both your interest rate and the monthly mortgage payments during the loan term. Your insurance and taxes may still change each year, but your core mortgage payment remains the same. This offers stability and makes family budgeting easier. It benefits those who plan to be in the home for longer periods of time.
Adjustable-Rate Mortgages
An adjustable-rate mortgage starts with a fixed interest rate that lasts for a specific length of time (such as five years). When your initial term expires, the interest rate adjusts to the market rate.
Adjustable-rate mortgages often offer a lower rate than fixed-rate mortgages during the initial term. But the adjusted rate in the future is uncertain. If it goes down, your monthly payment decreases. If it goes up, so does your payment. That means you benefit by staying in the home a short time and selling before your initial term expires.
What works best for you? Your credit union can help you find your way into an affordable home. Get in touch with mortgage experts and start house shopping with confidence.
