Question

What is one difference between fixed rate mortgages and variable rate mortgages

Answer 1

Answer:

In a fixed rate mortgage, your interest rate will stay the same for a set period of time. This is a better option as you will know, exactly how much you have to repay each month during that period. The payments are also fixed.

In a variable interest rate mortgage, the interest rates are periodically adjusted based on how the payment amount is applied to the mortgage. Like- if interest rates decreases then most payment goes towards principal and when interest rates increases, then more of the payment goes towards the interest.

Answer 2

With a fixed rate mortgage, the interest rate is set when you take out the loan and will not change. With an adjustable rate mortgage (ARM), the interest rate may go up or down. Many ARMs will start at a lower interest rate than fixed rate mortgages. This initial rate may stay the same for months or years.