When people shop for a home, they have options. One of these is that of a fixed-rate mortgage. A fixed-rate mortgage has an interest rate for the term of the loan that does not change. A benefit of this type of mortgage is that the interest rate stays consistent and does not fluctuate over the life of the loan, causing an adjustment in payments.
In some instances, an adjustable-rate mortgage appears more favorable to potential homeowners. This is often because the initial cost of the loan may be less than that of a fixed-rate mortgage. Over time, however, an adjustable-rate mortgage may result in higher monthly loan payments than what were initially taken on. Conversely, the payment that a homeowner begins with when taking on a fixed-rate mortgage is the one they will typically end with.
A fixed-rate mortgage allows for a homeowner to budget their finances accordingly. Moreover, this kind of mortgage is traditionally offered in 15- and 30-year increments. The current interest rates will be offered depending on the purchaser's credit score, and that interest rate will remain in place for the life of the loan. Other variables may come into play when adjusting the monthly payment, but none will have as great an impact as an adjustable interest rate may.
An experienced real estate agent can help homebuyers make the best decision based upon their unique financial situation. Speak to your agent about your options to determine if a fixed-rate mortgage is the best choice for your purchasing needs.