Pros and Cons of Adjustable-Rate Mortgages
Adjustable-rate mortgages tend to cost less than fixed-rate terms. However, the disadvantage is that there is no guarantee—homebuyers should have a certain amount of financial security in the case that they are required to make higher payments for some years. However, for those with the ability to take the risk, the choice could amount to substantial savings in the long run.
Adjustable-Rate Mortgage vs. Fixed-Rate Mortgage
In a fixed-rate mortgage, your monthly payment is set in stone until your loan is paid back in full. There are rigid rules in place on how much and when you can contribute to your mortgage, and any changes to the rules often come at the cost of punitive fines. While the predictability of a consistent payment is an advantage to a fixed-rate mortgage, they do not offer the cost-saving potential or flexibility of an ARM.
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