In today’s home mortgage climate, there are quite a few different home loan options to choose from. Today, though, we will look at the two basic-of-the-basic home mortgage options: the fixed rate and the adjustable rate. Each has its benefits, though in the long run it is usually better to get a fixed rate mortgage for the overall savings.

Advantages fixed rate mortgage

The best thing about a fixed rate mortgage is that the payments remain the same. Forever. You can budget them in, and there are no surprises when interest rates go up. You will save money in the long run, since rates are more likely to go up than down. And if they do go down, if you you’ve kept your credit score in a good place, you can refinance to a lower fixed rate (just don’t re-extend the term of the loan).

Advantages adjustable rate mortgage

The main advantages that come with an adjustable rate mortgage (ARM) mostly come at the beginning of your home loan. You can usually get a lower initial interest rate (it will undoubtedly go up later), and this may provide you a low enough payment to allow you to buy the house in the first place. ARMs are generally the choice of first time homebuyers, since it can help them get into the home in the first place. However, getting rid of your adjustable rate mortgage down the road and refinancing with a fixed rate mortgage will help you save money in interest charges over the long haul.

Use this home mortgage calculator from Bankrate.com to help you determine which type of home loan would be best for you.

Tags: home loan, personal finance, home mortgage, adjustable rate mortgage,
advantages fixed rate mortgage, home mortgage calculator, credit score