Fixed-rate mortgages have rates that stay the same, and adjustable-rate mortgages have rates that change. But beyond that, why would someone want one over the other?
Part of the answer lies in how long you plan on living in the property, for two reasons.
The first reason is that most adjustable-rate mortgages have a fixed-rate period at the beginning of the loan. This period is called the initial fixed-rate period and can be one, three, five or seven years long.
The other reason is that the fixed-rate period is often the lowest of any other time during the life of the loan.
Let’s say you were going to buy a property and planned on living in it for just five years. You could likely get an adjustable-rate mortgage, having an initial fixed-rate period of five years, with a lower interest rate than you would be able to get on a fixed-rate mortgage.
There are two considerations to keep in mind here. The first is that if you wound up staying in the property for more than five years, you could potentially see your interest rate increase over time.
The other is that when you qualify for an adjustable-rate mortgage, you would need to show enough income to make the payment as if it were as high as it could ever go.
Let me help you find the best type of mortgage for you, fixed or adjustable, on your next purchase or refinance transaction. I am just a call or email away.