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

Fixed-rate and adjustable-rate mortgages are two common types of loans offered by lenders, including EMC Mortgage. They serve different financial needs and preferences, and understanding the differences can help borrowers make informed decisions. A fixed-rate mortgage features an interest rate that remains constant throughout the life of the loan. This type of mortgage provides stability and predictability in monthly payments, making it easier for borrowers to budget. Borrowers can enjoy the benefit of knowing their payment amount will not change, regardless of fluctuations in market interest rates. Fixed-rate mortgages typically have terms ranging from fifteen to thirty years, allowing flexibility in how long one chooses to repay the loan. On the other hand, an adjustable-rate mortgage, often referred to as an ARM, has an interest rate that may change over time. These mortgages typically start with a lower initial rate for a set period, after which the rate can adjust periodically based on market conditions. This means that monthly payments can fluctuate, which may benefit some borrowers in the short term if they secure a lower initial rate. However, this variability may lead to higher payments when interest rates increase, making it essential for borrowers to assess their risk tolerance. Ultimately, the choice between a fixed-rate and an adjustable-rate mortgage depends on individual circumstances. Factors to consider include the length of time the borrower plans to stay in the home, their financial goals, and their comfort level with potential payment changes. Borrowers are encouraged to explore more on the current EMC Mortgage website for additional information and guidance.