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Compare a fixed rate vs variable rate mortgage

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20th Dec 2009 by Burt Carlson

The most common home loan product today is the 30 year fixed rate loan. The payment is fixed for 30 years based on the rate when the loan is closed. The variable rate mortgage (actually Adjustable Rate Mortgage or Arm) typically has a fixed period anywhere from 6 months to ten years then the rate (and payment) adjust based on an Index (varies based on an index such as Libor) plus a Margin (fixed at loan inception). When the payment adjusts the loan is reamortized over the remaing term based on the Index + Margin. Today the shortest Arm is 3 years but 10 year arms are still available. While Arm's were quite popular a few years ago today they represent a small percentage of loans because interest rates are so low.

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11th Dec 2009 by JonB

A fixed rate is just like it sounds: fixed. It doesn't not move with the interest markets, it doesn't change for any reason. It is simply fixed. A variable rate is a rate this is not fixed. It may change from month to month or from year to year depending on your particular loan. Variable rate loans are also referred to as Adjustable Rate Mortgages, or ARMs.

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10th Dec 2009 In Finance 2 Answers | 1725 Views
Subjects: fixed rate mortgage, variable rate mortgage,

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