What is the difference between fixed-rate and adjustable-rate mortgages?

Fixed-rate and adjustable-rate mortgages are two common types of home loans, each with distinct characteristics that cater to different financial situations and preferences. A fixed-rate mortgage offers a consistent interest rate over the life of the loan, meaning that the borrower’s monthly payments remain stable and predictable. This type of mortgage is ideal for individuals who plan to stay in their homes long-term and value budget certainty. Because the interest rate is locked in, borrowers are somewhat insulated from market fluctuations. On the other hand, an adjustable-rate mortgage typically begins with a lower initial interest rate that is fixed for a specific period, often ranging from two to ten years. After this initial phase, the interest rate adjusts periodically based on a specified index and margins, which can lead to variable monthly payments over time. This type of mortgage tends to attract those who expect to move within a few years or anticipate that interest rates will remain low. When deciding between the two, borrowers should consider their financial situation, future plans regarding home ownership, and their comfort level with potential changes in mortgage payments. For specific details and options regarding mortgage products, it may be helpful to explore the information available on the Central Mortgage Company website.