Fixed rate loans vs. adjustable rate loans

What are the advantages of fixed rate versus adjustable rate loans?

With a fixed-rate loan, your monthly payment of principal and interest never change for the life of your loan. Your property taxes may go up (we almost said down, too!), and so might your homeowner's insurance premium part of your monthly payment, but generally with a fixed-rate loan your payment will be very stable.

Fixed-rate loans are available in all sorts of shapes and sizes: 30-year, 20-year, 15-year, even 10-year. Some fixed-rate mortgages are called "biweekly" mortgages and shorten the life of your loan. You pay every two weeks, a total of 26 payments a year -- which adds up to an "extra" monthly payment every year.

During the early amortization period of a fixed-rate loan, a large percentage of your monthly payment goes toward interest, and a much smaller part toward principal. That gradually reverses itself as the loan ages.

You might choose a fixed-rate loan if you want to lock in a low rate. If you have an Adjustable Rate Mortgage (ARM) now, refinancing with a fixed-rate loan can give you more monthly payment stability.

Adjustable Rate Mortgages -- ARMs, as we called them above -- come in even more varieties. Generally, ARMs determine what you must pay based on an outside index, perhaps the 6-month Certificate of Deposit (CD) rate, the one-year Treasury Security rate, the Federal Home Loan Bank's 11th District Cost of Funds Index (COFI), or others. They may adjust every six months or once a year.

Most programs have a "cap" that protects you from your monthly payment going up too much at once. There may be a cap on how much your interest rate can go up in one period -- say, no more than two percent per year, even if the underlying index goes up by more than two percent. You may have a "payment cap," that instead of capping the interest rate directly caps the amount your monthly payment can go up in one period. In addition, almost all ARM programs have a "lifetime cap" -- your interest rate can never exceed that cap amount, no matter what.

ARMs often have their lowest, most attractive rates at the beginning of the loan, and can guarantee that rate for anywhere from a month to ten years. You may hear people talking about or read about what are called "3/1 ARMs" or "5/1 ARMs" or the like. That means that the introductory rate is set for three or five years, and then adjusts according to an index every year thereafter for the life of the loan. Loans like this are often best for people who anticipate moving -- and therefore selling the house to be mortgaged -- within three or five years, depending on how long the lower rate will be in effect.

You might choose an ARM to take advantage of a lower introductory rate and count on either moving, refinancing again or simply absorbing the higher rate after the introductory rate goes up. With ARMs, you do risk your rate going up, but you also take advantage when rates go down by pocketing more money each month that would otherwise have gone toward your mortgage payment.

Missouri Relocation, St Louis Real Estate, St Charles Real Estate, O'Fallon Mo, Fidelity Mortgage Capital, Fidelity, Fidelity Lending, san louis o san bienes raíces de mo de charles, MO Homes For Sale, Home For Sale In St Louis MO, missouri home search, Top Missouri Realtors®, st charles real estate, Best Realtor in St Chalres MO, St Charles Real Estate, St Louis Real Estate, Best Realtor in St Louis MO,St Charles MO Homes For Sale Home Search, St Louis Mo Real Estate, Saint Charles MO Realtors®, Chesterfield MO Real Estate,o fallon home loans, top realtor in st louis st charles, ofallon home loans, St Louis MO REALTORS®,wentzville real estate, top real estate agents in lake st louis, Missouri Home Search, Relocating to St Louis Missouri,Saint Charles MO Homes For Sale, saint louis real estate, top st louis realtor,top st charles realtor, Saint Louis MO Homes For Sale home search, Wildwood Real Estate,Winghaven Homes, Turtle Creek Homes, saint charles missouri schools, bilingual missouri real estate agents, Canvas Cove Homes, Monticello Homes,Manchester ,O'Fallon MO Homes For Sale home search, O Fallon MO Home For Sale home search, Homes For Sale In O Fallon MO, St Charles Mo Homes Real Estate home search,St Louis Homes, Lake St Louis MO Homes, st louis missouri real estate agents, top st louis real estate agent, Missouri Mortgage Companies, St Louis County,find a home in st louis, Homes For Sale In Lake St Louis MO, Wentzville MO Homes For Sale, Missouri Homes For Sale, Homes For Sale In Wentzville Mo, Homes For Sale In Missouri, assit 2 sell,find a home in chesterfield, Chesterfield Mo Homes, Missouri Real Estate, real estate in st louis mo, st peters real estate, lake st louis real estate, 2 Sell St Louis, 2 Sell St Charles, Buying a home in Missouri, mo low commission real estate, Selling a Home In Missouri, Prudential Realtors®, ballwin real estate, Prudential Patterson REALTORS® st Louis Mo, st charles real estate agents,Prudentil Patterson St Charles MO, Prudential Patterson, Chesterfield Real Estate,REALTORS® O Fallon MO,#1 Listing Agent in St Louis, Prudential Patterson Relocation, Ellisville Real Estate,Chesterfield Mo Homes For Sale Home Search, Homes For Sale In Chesterfield Mo, st louis real estate agent, st charles home loans, Ballwin Mo Homes For Sale Home Search, Homes For Sale In Ballwin MO, Ellisville Mo Homes For Sale, Find Homes In St Louis MO, find a home in wentzville,mo discount realtors,Homes For Sale In Ellisville MO, Creve Coeur Mo Homes For Sale, top missouri realtor, Homes For Sale In Creve Coeur Mo, Town and Country Homes For Sale home Search, Homes For Sale In Town and Country MO, Missouri Sellers Agents,Town Country Real Estate ,Missouri Buyers Agents, St Albans MO Homes for Sale Home Search, Homes For Sale In St Albans MO, Wildwood Mo Homes, Homes For Sale In Wildwood MO, St Peters MO, Augusta MO Homes, Augusta Real Estate, New Melle Real Estate,# 1 st charles real estate agent ,Homes For Sale in New Melle MO, Sell My St Louis MO House, Sell My St Charles County home, Top Missouri Realtor.