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If interest rates in general fall, then homeowners with fixed-rate mortgages can refinance, paying off their old loan with one at a new, lower rate. Fixed-rate mortgages tend to have higher interest rates than adjustable-rate mortgages. It generally makes the most sense to choose a fixed-rate mortgage if you are buying a home that you plan to keep for many years.
A payment-option ARM lets you choose from different ways to repay your loan, one of which is a minimum payment option. You might see a really low interest rate for the beginning of the loan term, and that’s what your payments will be based on. This is the interest rate you get for a set number of years before periodic adjustments kick in. Make sure it’s clear whether closing costs or other fees are lumped into this rate.
Additional ARM-related resources
Our participating lenders offer a variety of ARM loans, including 7/6, 5/6 and 3/6 ARMs. ARMs are generally considered riskier because your interest rate can go up after the initial fixed-rate period ends. The lower rate allows for extra money to pay toward the principal. Here's a look at the pros and cons of choosing an ARM over a fixed-rate mortgage.
This means the principal and interest portion of your monthly payment doesn't change. Initial interest rates and payments are typically lower than for a fixed rate loan. The average rate for a 15-year, fixed mortgage is 5.85%, which is a decrease of 15 basis points compared to a week ago.
What is a fixed-rate mortgage?
The initial interest rates for adjustable rate mortgages are often lower than a fixed rate mortgage, which in turn means your monthly payment is lower. Chart data is for illustrative purposes only and is subject to change without notice. Advertised rate, points and APR are based on a set of loan assumptions .

That can lead to a problem called negative amortization if your monthly payments aren’t sufficient to cover the interest rate that your lender is changing. With negative amortization, the amount that you owe can continue to increase, even as you make the required monthly payments. In most cases, you can choose the type of mortgage loan that best suits your needs.
What Is an Adjustable Rate Mortgage, and How Do You Get the Best Rates?
However, if you expect to see an increase in your income, going with an ARM could save you from paying a lot of interest over the long haul. If interest rates are high and expected to fall, an ARM will ensure that you get to take advantage of the drop, as you’re not locked into a particular rate. If interest rates are climbing or a steady, predictable payment is important to you, a fixed-rate mortgage may be the way to go. Home loan interest rate is an amount charged on the principal by a home loan provider to a borrower for the use of the principal amount. Your housing loan interest rate determines your monthly payable EMI against your home loan.

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HOW MUCH HOME CAN YOU AFFORD?
An adjustable-rate mortgage is a home loan where the interest rate changes with market rates. 3The index is the weekly average of the 1-year US Treasury securities adjusted to constant maturity of one year, as made available by the Federal Reserve. The caps are 2% annually and 6% lifetime based on the initial rate. Adjustment frequency refers to the rate at which an adjustable-rate mortgage rate is adjusted once the initial period has expired. These mortgages can often be very complicated to understand, even for the most seasoned borrower.
As you explore your options, think about all the factors that could make an ARM ideal for your situation, or could make an ARM a challenge for you in the future. Thanks to rising mortgage rates, affordability has taken a toll on many home buyers. This allows them to still afford the home they want without having to compromise due to higher rates.
An ARM is ideal for households who will sell or refinance before the rate changes. If that’s not the case, their interest rates could end up being remarkably higher after a rate adjusts. You'd need to refinance to take advantage of any lower interest rates in the future. Adjustment caps limit how much interest rates can increase at each adjustment date, while lifetime caps limit how much interest rates can increase over the life of the loan. Your lender must share these caps with you when you're applying for a loan. A periodic rate cap limits the increase a lender can make to the interest rate between each subsequent adjustment after the first one.

And that’s because this loan type is still the most reliable way to finance your home, offering affordability, flexibility, and so much more. As their name suggests, fixed rate loans have the same rate throughout the entire term of the loan. So even if interest rates rise while you’re paying off your loan, your rate and payment amount are locked in for the entire loan term. That’s why fixed-rate mortgages are so popular–they offer protections that ARMs can’t. The main advantage of a fixed-rate loan is that the borrower is protected from sudden and potentially significant increases in monthly mortgage payments if interest rates rise. Fixed-rate mortgages are easy to understand and vary little from lender to lender.
Must have a home loan application with Patelco to lock in a rate. Patelco will honor your rate up to 30 days from the date it is locked. Once a fully executed purchase contract is received, the rate will prevail until loan funding.
ARM loans are different from fixed-rate mortgage loans, which keep the same interest rate for the life of the loan. The rates shown above are the current rates for the purchase of a single-family primary residence based on a 45-day lock period. Your final rate will depend on various factors including loan product, loan size, credit profile, property value, geographic location, occupancy and other factors.
Chart accuracy is not guaranteed and products may not be available for your situation. Monthly payments shown include principal and interest only, and , any required mortgage insurance. Any other fees such as property tax and homeowners insurance are not included and will result in a higher actual monthly payment. Advertised loans assume escrow accounts unless you request otherwise and the loan program and applicable law allows. Should you choose to waive escrows, your rate, costs and/or APR may increase. Select the About ARM rates link for important information, including estimated payments and rate adjustments.

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