If you’re currently shopping around for a mortgage, you may have heard a lot about fixed rates and adjustable rates. Each of these options have certain advantages and downsides for homebuyers, depending on their specific financial situation. First & Peoples Bank and Trust Company of Russell, KY, offers the following advice to help you determine which option works best for you.

Fixed-Rate Mortgages

Interest on fixed-rate mortgages will not change over the duration of your loan. This offers a sense of stability that many homeowners crave, as the mortgage won’t be affected by market fluctuations. Because of this, many first-time buyers choose this option, as its terms tend to be easier to understand. Plus, you can rest assured of easier budgeting since you won’t have to contend with increased payments.

However, there is the possibility that the interest rate drops over the loan period. In this instance, people with fixed-rate mortgages would need to refinance with their bank to get the lower rate. Re-financing your home can be an intensive process, and you’ll need to cover closing costs once again. Additionally, fixed-rate mortgages can’t be easily customized, which means they may not be suitable for all homebuyers.

Adjustable-Rate Mortgages (ARM)

With an ARM, you can access low interest rates and payments in the beginning of the term. That means homeowners can save money easily while rates are low, which can be used for investment purposes or to cover costs should rates increase again. Unlike fixed-rate loans, an ARM allows homeowners to take advantage of lower rates as the market fluctuates—without the need for refinancing.

The major downside of ARM loans is that rates can grow exponentially. Theses types of mortgages are also a lot more complex, which means that some buyers may have trouble understanding what exactly they’re agreeing to, which can lead to financial hardship should rates rise suddenly. For instance, poor amortization of loans could result in an increased cost overall if interest accrual exceeds repayment rates.

Securing funding for the home of your dreams is a complex process, which is why it’s crucial that you work with skilled and experienced mortgage professionals. First & Peoples Bank and Trust Company offers trustworthy service to its clients, whether they are buying a home or looking to open up a savings account for their child’s college fund. Take advantage of more than eight decades of experience by calling (606) 836-0211 today. If you’d like more information on securing a loan, visit them online.