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Buying a house in today’s real estate market usually requires a mortgage loan from a reliable provider. These financing plans almost always carry interest — an additional charge set by the lender that accrues over the life of the loan. But while you can expect to pay interest, it’s important to know that these rates can vary based on the structure of the mortgage. To help you better assess your options, consider two of the most popular approaches to interest rates: fixed- and adjustable-rate mortgages.

What’s a Fixed-Rate Mortgage?

A fixed-rate mortgage carries the same interest rate throughout the life of the loan. It is commonly applied to 15- or 30-year mortgages.

mortgage loanDuring the first several years of homeownership, fixed loans will typically carry higher rates than adjustable mortgages. However, these rates will stay the same regardless of market conditions. As such, fixed-rate plans can help reduce costs in long-term situations.

What’s an Adjustable-Rate Mortgage?

Adjustable-rate mortgages, or ARMs, start with a fixed interest that is comparatively lower than other options. However, after a specific period (about 5 to 10 years), the rate will be adjusted regularly according to the current market conditions.

While the initial low rate can be advantageous, ARMs carry more risk than fixed mortgages. Since real estate market conditions cannot always be predicted, homeowners may find that their rates increase a considerable amount over the year. However, if the market is favorable, borrowers can enjoy rates that are lower than fixed-interest plans.

Which Mortgage Loan is Right for You?

Each type of mortgage loan offers unique advantages, so it’s important to choose the right one for your situation.

Fixed-rate plans are ideal for consumers that want to take on a predictable risk and can afford the same payment over several years. This option typically appeals to individuals who have a stable income or those who plan to live in their homes indefinitely.

ARMs, on the other hand, are favored by buyers who need more financial flexibility. Due to the low initial fixed rates, this mortgage plan is attractive to first-time homebuyers who are still advancing in their careers and want to save during their first few years of ownership. Some may also refinance to a fixed-rate plan at a later date.

ARMs are also practical for those who may plan to move when the loan converts to an adjustable rate, such as those who may have to relocate for work or are planning on building a family.

 

 

When you’re ready to become a homeowner, Armstrong County Building & Loan Association offers comprehensive financing assistance. Understanding that every buyer is unique, this financial services provider in Ford City, PA, takes a personalized approach to help borrowers find the most appropriate and beneficial fixed- or adjustable-rate mortgage loan. They also offer many other programs for homeowners — including second mortgages and construction loans. You can learn more about these opportunities online or by calling an expert at (724) 763-7137.

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