Fixed Rate Mortgage VS Variable Rate Mortgage - Which Home Loan To Choose

By [http://ezinearticles.com/?expert=Joshua_Spaulding]Joshua Spaulding

Let's take a look at the pros and cons of each type of mortgage. A fixed rate mortgage, also called a conventional mortgage carries an interest rate that does not change over the life of the loan. A fixed rate mortgage has the benefit of a predictable payment and locks you in to today's interest rates for the future. Because interest rates are low now but predicted to rise in coming years, you should definitely consider this aspect of the fixed rate loan to be a benefit.

Variable rate mortgage loans have benefits as well. Typically, the initial five or ten years of an adjustable rate loan carry an interest rate that is lower than that of a fixed rate loan. It is after that time that the adjustable rate loan adjusts its rates to be in line with the current prime rate. That said, there are several different types of ARM's and the specifics of how interest rates are handled are different for each type vary.

In order to choose the best mortgage for your circumstances and lifestyle, you must ask yourself a few questions. First, how long do you plan on living in the home? The average family moves every seven to ten years. If you do not plan to live in your home for very long, you may be better off with the lower rates offered to you during the initial period of an ARM.

Likewise, if you plan to live in your home forever then it may make more sense to take the slightly higher but predictable fixed rate mortgage and lock in the low interest rates that are currently being offered.

Another point to consider is if you plan to borrow against your equity in the future for college tuition or other foreseeable expenses. If this is the case, you may wish to consider the advantages of taking the lower rate ARM and doing a cash out refinance when it comes time and you need those funds. Basically, if you can see yourself needing to refinance the mortgage in a few years anyways, you may as well enjoy the lower rates now.

It is important to know that the lower the interest rate, the more of your monthly payment goes towards paying down the principal on your mortgage and the faster your equity builds. Such is the case in the initial phase of a variable rate mortgage.

It is decisions like this where it becomes very important that you do your best to plan for the future so that you can make the best choices for that future today. While refinancing is always an option, the choice of a variable vs. a fixed rate mortgage can save you money or cost you money depending on your choices and market conditions beyond your control.

To learn everything about the different [http://www.gethomemortgageloan.com/type-of-mortgage-loan.html target=_parent]Types of Mortgage Loans visit http://www.gethomemortgageloan.com/ where you'll find everything you need to know about [http://www.gethomemortgageloan.com/ target=_parent]Home Mortgage Loans

Article Source: http://EzineArticles.com/?expert=Joshua_Spaulding http://EzineArticles.com/?Fixed-Rate-Mortgage-VS-Variable-Rate-Mortgage---Which-Home-Loan-To-Choose&id=670361



Further Information：Private Student Loan Consolidation


Technorati Tag：Refinance Home Equity Mortgage