Adjustable versus fixed rate loans

	In the market for a mortgage loan? We can assist you! Call us at 573-302-9990. Ready to get started? Apply Online Now.

A fixed-rate loan features a fixed payment over the life of your loan. The property taxes and homeowners insurance will go up over time, but for the most part, payments on fixed rate loans don't increase much.

Your first few years of payments on a fixed-rate loan are applied mostly to pay interest. As you pay on the loan, more of your payment is applied to principal.

Borrowers can choose a fixed-rate loan in order to lock in a low rate. Borrowers choose fixed-rate loans because interest rates are low and they want to lock in the lower rate. For homeowners who have an ARM now, refinancing into a fixed-rate loan can offer greater stability in monthly payments. If you currently have an Adjustable Rate Mortgage (ARM), we'll be glad to assist you in locking a fixed-rate at the best rate currently available. Call MHQ Financial Services at 573-302-9990 for details.

There are many different types of Adjustable Rate Mortgages. ARMs are normally adjusted twice a year, based on various indexes.

Most programs have a cap that protects borrowers from sudden monthly payment increases. Some ARMs can't increase more than 2% per year, regardless of the underlying interest rate. Sometimes an ARM features a "payment cap" which guarantees your payment will not go above a certain amount in a given year. In addition, the great majority of ARMs feature a "lifetime cap" — your rate won't exceed the cap amount.

ARMs usually start out at a very low rate that may increase as the loan ages. You may have heard about "3/1 ARMs" or "5/1 ARMs". For these loans, the initial rate is fixed for three or five years. After this period it adjusts every year. These types of loans are fixed for a number of years (3 or 5), then adjust. Loans like this are usually best for people who anticipate moving in three or five years. These types of adjustable rate loans most benefit borrowers who plan to move before the loan adjusts.

You might choose an Adjustable Rate Mortgage to get a lower introductory interest rate and count on moving, refinancing or simply absorbing the higher rate after the initial rate expires. ARMs are risky when property values go down and borrowers are unable to sell or refinance their loan.

Have questions about mortgage loans? Call us at 573-302-9990. It's our job to answer these questions and many others, so we're happy to help!