New York Banking Rates

New York Mortgage Rates: Fixed Versus Adjustable

There are so many decisions to make when it comes to buying a house. You have to plan out what you can afford to pay each month, find a home that fits your personal and financial life, choose a lender, locate the top mortgage rates–the list goes on and on. One of the things you may not have considered, however, is the type of home loan you need. Getting the best interest rate isn’t just about finding the lowest number. You must also be sure the type of mortgage you secure is right for your financial situation. Below is a look at the two most common types of mortgages: Fixed rate and adjustable rate.

New York Fixed Rate Mortgages

A fixed rate mortgage is often the top choice among borrowers who value reliability above all else. These mortgages have rates that remain the same for the entire term of the loan, so the borrower pays the same amount every month.

The biggest advantage to having a fixed rate mortgage is the fact that there are no surprises when the loan payment is due. While the interest rates may be a bit higher that other types of mortgages offer, it’s well worth it to a person who must fit their loan into a carefully planned budget. The most common fixed rate mortgage terms are:

  • 15-Year Fixed: Keeping your loan relatively short-term will reduce the number of payments you make over the life of your loan and therefore, cut the total amount of interest you must pay. 15-year mortgages also have lower interest rates that longer-term loans.
  • 30-Year Fixed: By doubling the amount of time you have to pay back your loan, you greatly reduce monthly payments. While the interest rate is a big higher, some people prefer to cut expenses on a monthly basis rather than in the long run.

Adjustable Rate Mortgages in NY

An adjustable rate mortgage (ARM) presents more risk to the borrower, but taking on more risk means the possibility for a greater reward.

An ARM begins with an introductory interest rate that is fixed for the first few years of the loan. This rate is usually much lower than that of an actual fixed rate mortgage. However, the interest rate is tied to a particular financial market or index, and when the intro period is over, the rate adjusts to reflect present market conditions. That means the interest rate could go up or down, with the possibility of changing significantly.

So before you go about applying for a mortgage loan, first figure out whether you want the reliability of a fixed rate or the chance to save big with an adjustable rate. Both options are great choices–but only if they meet the borrower’s particular needs.