Types of Rates
Whether you’re in the market to purchase a new property – or preparing to refinance an existing one – it’s always good to understand the choices that may present themselves.
Looking for some stability in your loan? Maintain the original interest rate throughout the entire life of the loan in 30- and 15-year terms.
This ‘traditional’ type of loan maintains its original interest rate throughout the entire life of the loan. Therefore, fluctuations in market rates over the term of the loan won’t have any impact on the loan payment.
Typically, interest rates on shorter term fixed-rate mortgages are lower than their longer term counterparts.
Get a loan where the initial interest rate is set for 3 or 5 years. With lower than standard fixed rates, your initial payments will be lower and adjust later.
Unlike a fixed-rate mortgage, adjustable-rate mortgages are subject to rate adjustments during the life of the loan. Because of this, they have lower initial interest rates than fixed-rate mortgages.
The lower rates (and the accompanying lower monthly payment) can help the borrower qualify for a higher loan amount. Typically, interest rates on adjustable-rate mortgages with shorter initial fixed-rate periods are lower than their longer initial fixed-rate period counterparts.