| Mortgage interest rate plays an important part in | | | | are considering this option, consult your financial adviser |
| deciding your home loan. You could consider a fixed | | | | or broker to know more about it. As a first time home |
| rate or an adjustable one in this regard. It is important | | | | buyer, most people would not consider this option as |
| to know the disadvantages and advantages of both | | | | they are not comfortable with a variable interest rate. |
| these types of interest rates, so as to decide on which | | | | The ARM is tied down to a financial index on which |
| of the two would offer the best option. | | | | the lender sets a margin for your loan. This index |
| Types | | | | fluctuates with the rise and fall in economy and hence |
| Before you buy mortgage loan or pick up a calculator | | | | the ARM also fluctuates. Although the initial type is |
| to find out whether your current rate needs a revision, | | | | usually lower than the fixed rate, still over a long period |
| you must know the difference between fixed and | | | | of time, there is a high risk of losing more money than |
| adjustable rate. | | | | the fixed rate borrowers. |
| Fixed Rate: | | | | To explain this better, if there is inflation, the adjustable |
| This option is the most suitable for borrowers who do | | | | mortgage rate could rise higher than the fixed one. In |
| not like taking risks. In this option, the interest is steady | | | | comparison, the fixed one is more stable and |
| throughout the life of the loan. You need to only make | | | | predictable. You always know the amount of interest |
| a steady payment every month towards your fixed | | | | rate that you have to pay, come hail or sunshine. If you |
| mortgage rate. You can consider this option if your | | | | feel that you can manage to stay abreast of the ups |
| interest rate is lower than 8-10% marker. As this option | | | | and downs in the market and keep your adjustable |
| suits your budget and plan, you will not face a sudden | | | | rate in control, go for ARM. |
| increase in payments if the charges go up. | | | | Finally, consult your friends and family, who have taken |
| Adjustable Rate: | | | | the two types of mortgage interest rate to choose the |
| Also known as ARM, adjustable mortgage rate | | | | right one for yourself. |
| fluctuates with the changes in the market. So, if you | | | | |