FRM vs ARM

Hi Ben,

Monthly mortgage payments for fixed rate mortgage are stable all through the loan term but in adjustable rate mortgage, monthly payments do vary. The rate on ARM will be lower for the first three years of the loan but after that it will be adjusted every year according to the index.

Thanks,
Jerry

Hi Ben,

What jerry has said is right. From the name of the loans you have a fair idea about the loan type.

For example, Fixed rate mortgage now by this you can make out the rates in this type of loan will be fixed and for Adjustable rate mortgage the rate will be adjusted as per the index.

For more information on this topic visit our section on Fixed vs Adjustable Rate Mortgage

God Bless You

Thanks,
Samantha

With an FRM,
1)The interest rate remains fixed throughout the mortgage term.
2)It is easy to plan and budget for a FRM since the interest rate and the amount to be paid every month are fixed.
3)But disadvantage is the mortgage lender is likely to charge a higher interest rate in order to compensate for the risk of increase in the market rate of interest .

With an ARM,
1)The interest rate may change during the term, after an agreed fixed- rate period ends.If you are only going to stay at your new home for a few years, a low-rate ARM is evidently a better choice.The low initial interest rate resulting in low monthly payments of ARMs can be very attractive to homebuyers.
2)You will have a lower monthly payment because of the lower initial interest rate.If the interest rate go down or drops, your monthly payments will also down or drop.
3)If the interest rate increases, your payment will also increase significantly.If Larger payment comes then you might not be afford that payment this is risk in this type.

Both mortage periode has diffrent so which your need you will be decided which is good or affordable for you.

I hope you got an idea regrding FRA and ARM

Thanks
Hari

in this 2009 marketplace, fixed rates and adjustable rates are pretty much indistinguishable. fixed makes a great deal more sense in this type environment.

jerry's comment about "three years" would only apply if you were looking into what is termed a "3/1" arm. adjustables can be annual, 3, 5, 7 and 10 year.

Some banks are actually pricing their ARMs higher than the FRMs