Fixed versus adjustable loans

	Shopping for a mortgage? We'd be thrilled to discuss our many mortgage solutions! Call us at (817) 235-3089. Want to get started? Apply Now.

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

At the beginning of a a fixed-rate mortgage loan, most of the payment is applied to interest. The amount paid toward principal increases up gradually every month.

Borrowers can choose a fixed-rate loan to lock in a low rate. Borrowers select fixed-rate loans because interest rates are low and they want to lock in this low rate. If you have an Adjustable Rate Mortgage (ARM) now, refinancing into a fixed-rate loan can offer greater consistency in monthly payments. If you have an Adjustable Rate Mortgage (ARM) now, we'd love to help you lock in a fixed-rate at the best rate currently available. Call FNB Town Square Mortgage at (817) 235-3089 to learn more.

Adjustable Rate Mortgages — ARMs, as we called them above — come in even more varieties. ARMs usually adjust twice a year, based on various indexes.

Most ARM programs feature a cap that protects you 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" that guarantees that your payment can't increase beyond a fixed amount in a given year. Plus, the great majority of ARMs have a "lifetime cap" — this cap means that your interest rate won't go over the cap percentage.

ARMs usually start out at a very low rate that usually increases over time. You may have heard about "3/1 ARMs" or "5/1 ARMs". In these loans, the introductory rate is set for three or five years. After this period it adjusts every year. These loans are fixed for 3 or 5 years, then adjust after the initial period. Loans like this are best for borrowers who expect to move in three or five years. These types of adjustable rate programs most benefit borrowers who will sell their house or refinance before the loan adjusts.

Most people who choose ARMs choose them when they want to get lower introductory rates and do not plan on remaining in the house longer than the introductory low-rate period. ARMs can be risky when housing prices go down because homeowners can get stuck with rates that go up if they cannot sell or refinance with a lower property value.

Have questions about mortgage loans? Call us at (817) 235-3089. We answer questions about different types of loans every day.