WEI Mortgage Corporation: What’s the Difference Between Fixed-rate and Adjustable-rate Mortgages?

Like many residential mortgage lenders, WEI Mortgage Corporation offers a wide range of financial tools that can be customized for individual customers. Recognizing that each home buyer has unique financial needs, WEI Mortgage Corporation recently began offering custom-term mortgages that are unique to each borrower. While the most popular are still fixed-rate mortgages, home buyers may also choose adjustable-rate mortgages. But what is the difference?

Just like it sounds, a fixed-rate mortgage has an interest rate that is fixed over the life of the loan. Many consumers like this feature because they don’t have to worry that their monthly interest payment will skyrocket. However, this certainty comes at a cost. It will usually take longer to build equity because interest payments make up a large share of the payments at first, when the principal on the mortgage is large. In addition, monthly payments are generally higher, and the home buyer often ends up paying more in interest over the long term.

Some home buyers try to get around these disadvantages by seeking an adjustable-rate mortgage. The interest rate on these mortgages will vary with market prices, so customers risk seeing their monthly payments increase steeply. However, the payments are usually lower than fixed-rate mortgage payments, and borrowers can usually obtain larger mortgages if they agree to a variable rate.


WEI Mortgage Corporation Presents: Fixed-Rate Versus Adjustable Rate Mortgages

Fixed-rate and adjustable rate mortgages are the two most common mortgages available, but many people do not know which mortgage to choose for their financial situation.

A fixed-rate mortgage sets a rate of interest that remains the same through the loan period. This makes it easy for homeowners to factor mortgage payments into their budgets. Fixed-rate loans also protect homeowners from sudden jumps in monthly payment should interest rates spike. In contrast, an adjustable rate mortgage (ARM) changes over the loan’s lifetime. The rate starts at below the market rate of a more-or-less equal fixed-rate loan, then increases over time.

The idea of gradually rising interest might make fixed-rate mortgages seem the more attractive option, but an ARM is a good choice for homeowners who believe they can pay off their mortgage, or plan to move, before interest rates climb too high.

About WEI Mortgage Corporation: Founded in 2002, WEI Mortgage Corporation is a direct mortgage lender and a leader in the lending industry.