|Statement||by Wray O. Candilis.|
|Contributions||American Bankers Association. Mortgage Finance Committee.|
|LC Classifications||HG5095 .C35|
|The Physical Object|
|Pagination||iv, 40 p.|
|Number of Pages||40|
|LC Control Number||72026808|
A variable-rate mortgage (also called an Adjustable Rate Mortgage, ARM) is a loan in which the interest rate paid on the outstanding balance varies according to a specific benchmark. Typically, the initial interest rate is fixed for a specified period of time, and then it periodically adjusts. The advantage of a variable-rate mortgage is that the interest rate can adjust downwards on some loans. Accordingly, these rates can adjust upward as well, making the monthly payment higher. Here are the differences between a fixed-rate and variable-rate mortgage. Fixed Rate Mortgage A fixed-rate mortgage is one in which the interest rate is fixed for a period of time - usually between 1 and 5 years, although some lenders offer longer terms. The borrower pays the same amount (interest plus principal) for the term of the mortgage. Fixed-rate mortgages are the most popular mortgage. These “additional funding fees,” don’t apply to variable-rate mortgages. Therefore, if you plan on paying down your mortgage sooner than expected, it’s a prudent strategy to go for a variable-rate facility instead. Also, changing banks with your fixed-rate mortgage .
Depending on your financial situation, it may be worth switching from a fixed rate mortgage plan to one with a variable rate, especially when the market leading fixed rates . Variable & fixed rate mortgages explained. It can be hard to decide upon which mortgage is right for you when you want to take out a loan to buy a property. There are quite a few different types of mortgage and each has their own good and bad points.. This guide will examine two types of mortgages - fixed rate and variable rate. Knowing the. Variable rates are offered on mortgages of different term lengths, though generally 3 or 5 years. 5-year variable rate mortgages typically have lower interest rates, which is obviously a big positive, but there are other factors that might make a 3-year variable rate a better option. A fixed rate mortgage has the advantage of being a sure thing. You know what your rate is for the life of the loan and that it will not adjust. The only disadvantage to a fixed rate is if rates go down and you're stuck paying the higher rate. Variable rate mortgages have the benefit of offering lower interest rates during the initial, fixed period.
A popular type of variable rate loan is a 5/1 adjustable-rate mortgage (ARM), which maintains a fixed interest rate for the first five years of the loan and then adjusts the interest rate after. Interest on VRMs is also better than fixed-rate mortgages. While fixed-rate mortgages can have interest rates well-above 3%, VRMs start as low as %.. Finally, the penalty for breaking the terms of a VRM loan is not as severe (usually 3 month’s interest).. Though the facts are heavily in favour of variable-rate mortgages, a fixed-rate mortgage can be preferable in certain conditions. Monmouthshire Building Society 2 Year Variable mortgage. Initial rate %. APRC %. Set-up fees £0; Monmouthshire Building Society 2 Year Variable mortgage. Initial rate %. APRC %. Set. With a variable rate mortgage you can take advantage of some of the lowest rate deals on the market. You would risk some uncertainty about your future rate. The base rate stayed at % from to , before falling to % in