The mortgage industry has been hard to keep track of over the last couple of years, with various economic factors at play, including the continued effects of the COVID-19 pandemic and rising inflation. There are different considerations for different types of buyers in any market; do you want to know about fixed and adjustable mortgages before deciding? Here are the most important things you need to know.
The Key Differences
When applying for a mortgage, it’s crucial to have all the information about available options. A fixed-rate mortgage means the interest rate is set when you take out the loan and doesn’t change throughout the life of repayment. When you have an adjustable-rate mortgage, the interest rate will fluctuate and change at various intervals.
Adjustable-rate mortgages, otherwise known as ARMs, have recently experienced a transition. ARMs were previously calculated based on the LIBOR index for a long time, but recently, that all changed. Today, we use the SOFR Index. Part of the reason for this was the unfortunate manipulation of LIBOR by a few corrupt bankers. The switch was an enormous undertaking, and LIBOR was phased out in 2021.
To learn more about what makes SOFR different from LIBOR, check out this article from Nerdwallet.
How to Choose the Right Program for You
Now it comes to choosing between a fixed or an adjustable-rate mortgage when buying your home. Each program may be available for different reasons to different home buyers based on the specific situations, so it’ll be up to you and your mortgage lender to have a frank conversation about your options. A very important question to ask yourself is how long you plan to stay in your new home.
Your next step is to get preapproved for your mortgage before you start looking for a home. Give Zachery Adam and the team at GoPrime Mortgage in West Asheville a call to learn more about the available options and the amount you qualify for. That will save you a massive headache in the next steps of the process.
Do you have questions about fixed-rate and adjustable-rate mortgages? Don’t hesitate to reach out!