A mortgage loan is a type of loan used to buy a property, where the property serves as collateral. Deciding between a fixed or adjustable interest rate is the most crucial factor when applying for a mortgage loan. While adjustable-rate mortgages come with higher risks, their initial low rates make them attractive, especially with the rising rates. At the same time, fixed-rate mortgages offer more peace of mind during the long run without the potential rate hikes of adjustable-rate loans.
In this article, we’ll explore both options to help you make an informed decision that meets your financial goal.
Mortgage Loan Rate Types
The table below explains the key differences between adjustable and fixed mortgage loans.
|Adjustable-Rate Mortgage Loan
|Fixed-Rate Mortgage Loan
Pros and Cons of Adjustable Vs Fixed Rates
Adjustable-Rate Mortgage Loan
Fixed Interest Rate Mortgage Loan
What to Choose? Adjustable or Fixed Mortgage Loan
The decision of whether to get a fixed-rate or adjustable-rate mortgage loan could significantly affect your financial future.
Adjustable mortgage rates might be the better option if you aim to have low monthly payments in the near term and are ready to live with the uncertainty of future monthly payments.
Low-rate adjustable-rate mortgages reduce monthly EMIs because they have higher initial rates. Thus, making it easier if you are just starting your career or want to buy a home that costs more money. However, adjustable LAP loan interest rates can rise over time, meaning larger EMIs.
On the other hand, a fixed-rate mortgage might be more suitable if a consistent monthly payment is what you value and you are prepared to pay more for assurance. In addition, home loans with fixed interest rates guarantee that the monthly EMIs will not change. It facilitates budgeting and planning for future financial requirements.
A fixed-rate mortgage can be better for those who intend to live in their house for an extended time. However, an adjustable mortgage loan rate might be a better option for those who intend to sell their property soon – potential buyers may find the house more alluring because of its lower monthly EMIs.
Understanding the difference between fixed and adjustable rates is the key step in choosing a mortgage loan. Carefully consider your financial situation and goals to make the right decision for you.