You might consider becoming a homeowner as a way to acquire or maintain wealth, and it’s a smart move! Real estate is wise investment because it serves the practical purpose of providing you with a living space while often appreciating in value. When securing your bank loan, pay close attention to the terms. Many people fail to understand the difference between fixed-rate and adjustable-rate mortgage loans. In general, the better option depends on your personal situation. For help sorting out the differences, trust Putnam 1st Mercantile Bank in Cookeville, TN, to provide the information you need.

Know Your Mortgage Loans

Fixed Vs. Adjustable Rates

If you get a fixed-rate mortgage, the interest charged will remain the same throughout the entirety of the loan. With an adjustable-rate mortgage (ARM), you are susceptible to interest fluctuations that depend on several factors, most notably the rate set by the U.S. Treasury. You can often get the bank lender to set a relatively low rate at the start of an ARM, perhaps the first few months or years, before allowing the market to dictate things, which could make it more attractive at first. 

Which Of The Mortgage Loans Is Better?  

In general, those who have secure financial standing might want to opt for a fixed rate. These mortgages are set in stone and will not vary which provides you piece of mind for future planning. Fixed rates are usually higher than ARMs initially; however, over time, this fact could mean tremendous savings because market conditions will never cause the monthly bill to rise.

Those who choose ARMs put themselves at the mercy of external factors, sometimes global, of which they have virtually no control. Nevertheless, someone who needs a lower monthly payment when starting out might want an ARM, especially if their outlook for future income is strong.

Deciding whether to get ARM or fixed-rate mortgage will depend on the current average interest rate, your personal financial standing, and the loan services company you choose. For more information on your mortgage loan options, call Putnam 1st Mercantile Bank in Cookeville at (931) 528-6372, or see their website for details.