Please explain…What is “fixed rate” vs “adjustable rate” (mortgage loan)?

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i just refinanced my home the original value was 45k and i had it paid down to 35k. when i refinanced it brought the value i need to pay back up to 51k. i have a adjustable rate now that will kick in may of 09 my percent is 12.750 i think. i pay 500 a month now for the mortgage and 720 total with all the taxes and stuff. i dont have a penalty for paying the loan of early so i want to pay it off in the next five years but with the arm my percent can go as high as 18.750. i dont want the bank to take my house from me because of the mistake i made by refinancing in the first place. so is it possible to refinance into a fixed rate and still keep the loan at 50k and still pay it of early with out any penalty. this is my first post so plz any and all help is great

9 Comments
  1. Reply
    Butch
    January 31, 2011 at 1:59 pm

    A fixed rate is much better it doesn’t go any higher no matter how high interest rates goes. If it closes at the current rate of 6%
    then 10 years down the road if loans are going at 10% your loan doesn’t change. You know up front what you are going to pay every month for the life of the loan.
    Adjustable rate mortage is one that goes up or down what ever the current interest rate is somethings it is lower and that’s great but what happens if interest rates go up. You could get stuck with a house payment you can’t afford. Never get an adjustable that is only good for the bank not for you. that is what the bank will try to talk you in to. But some people lose their house over it.

  2. Reply
    sureno1
    January 31, 2011 at 2:58 pm

    A “Fixed Rate” on a home is a price you will be paying monthly, an “Adjustable Rate” is when your monthly home payment can go up or down. Best bet is “Fixed Rate’

  3. Reply
    jonnydollar1950
    January 31, 2011 at 3:25 pm

    basically, a fixed rat is just that, a set rate of int rest over the lifetime of the loan. an adjustable rate loan fluctuates with the prime rate banks pay to borrow. if the prime rate increases so does your rate.

  4. Reply
    Floyd B
    January 31, 2011 at 3:28 pm

    A fixed rate stays the same for the life of the loan.

    An adjustable rate starts out lower but can be increased.

    An adjustable rate is great if you don’t plan to live there long.

    If you have an adjustable rate & your timing is right so you switch to a fixed rate before the adjustable rate becomes to high.

  5. Reply
    ALEGNA
    January 31, 2011 at 3:47 pm

    ADJUSTABLE rate is cheaper….Advantage, it give you a chance to even lower rate.

    Fixed rate more expensive, takes forever to paydown principal. Advantage, it doesnt fluctuate…”safe”.

    Sorry, guys but I rather keep an eye on my mortgage and save thousands of dollars, than spend thousand of dollars to feel “SAFE”.

    If you knew that after 5 years,it cost you about hmmm $ 20,000 more having a fixed rate, woulld you do it? If your answer yes, then FIXED rate IS for you!

    Sorry, you’re not even trying to get a loan, huh? You just wanted an FYI?

  6. Reply
    cpruitt62
    January 31, 2011 at 4:12 pm

    A fixed rate mortgage is exactly what it sounds like. The rate is locked at one rate for the entire term of the loan. This term can be 5-50 years depending on the loan program selected. In addition, there may be an interest only payment period for the beginning years of the loan even though the rate is fixed for the entire term.

    An adjustable rate mortgage has an interest rate which periodically adjusts to coincide with a preselected index interest rate. Most often the the one year treasury bill rate, the 6 month or one year LIBOR rate, or the prime rate. The terms of the adjustments are agreed to at the inception of the loan. After an initial fixed rate period which can last anywhere from 1 month to 10 years depending on the loan terms selected, the rate will adjust to the index rate plus a preselected margin. Historically, these loans have provided lower interest rates for people who only intend to keep the home for a shorter time period. The longer the fixed rate term you select, the higher your starting rate. Because of all the recent increases in short term interest rates, ARM interest rates are not that much better than fixed rates for borrowers who choose ARM programs with initial fixed rates of 3 years or longer.

  7. Reply
    matzael
    January 31, 2011 at 4:27 pm

    Whether or not you personally can do any kind of refinance depends on your credit, income, and the value of the home.

    If you’re asking if no or low closing cost mortgages exist? Absolutely. Typically the rates are a little bit higher, but honestly your rate is really high right now, it should still be significantly cheaper than 12.75 even with the bank paying the closing costs.
    By the way check your Adjustable Rate Rider from your original mortgage. Odds are there are caps on how much and how often your rate will adjust. If you’re paying this loan off in the next few years it may not even be possible for it to adjust up to 18.75 that quickly.

  8. Reply
    too l
    January 31, 2011 at 4:47 pm

    Before you refinance again try credit repair… Improve your FICO score for a better rate….

  9. Reply
    rechdxs
    January 31, 2011 at 5:43 pm

    If you have room on your credit card, you can use a service like http://cardit.com to pay your mortgage with it. The purchase is not a cash advance, so if you have a good rate on your card, it will be fixed and possibly better than your adjustable.

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