What is the difference between a fixed-rate and an adjustable-rate mortgage?

A fixed-rate mortgage and an adjustable-rate mortgage represent two distinct types of home financing offered by mortgage companies, including Franklin American Mortgage Company. A fixed-rate mortgage features a stable interest rate that remains constant throughout the life of the loan, which typically ranges from fifteen to thirty years. This means that the monthly mortgage payments do not change, providing borrowers with predictability in budgeting for their housing costs. Homeowners often prefer fixed-rate mortgages for their stability, especially in a rising interest rate environment. On the other hand, an adjustable-rate mortgage, often referred to as an ARM, features an interest rate that can change at specified intervals based on market conditions. Generally, ARMs start with a lower initial interest rate compared to fixed-rate mortgages. However, after an introductory period, the rate adjusts, which can lead to increased monthly payments if interest rates rise. Borrowers might choose an ARM to take advantage of the lower initial rates, particularly if they plan to sell or refinance before the rate adjusts. Ultimately, the choice between a fixed-rate mortgage and an adjustable-rate mortgage depends on individual financial situations, risk tolerance, and future housing plans. It may be beneficial to explore the relevant web pages for more details and specific options available through Franklin American Mortgage Company.