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Loan Basics

There are two main types of loans. Fixed-rate and Adjustable.

Fixed Rate

fixed_percentageA Fixed-rate mortgage is the most popular type of mortgage in Maryland, because it offers the homeowner the comfort of stable payments throughout the life of the loan. It is also fully amortizing mortgage, which means it is designed to paid in full by the end of the loan’s term.
No final balloon payments, no extensions on the loans term (unless you refinance).

The monthly payment on a fixed-rate loan is always the same, for the duration of the loan. This allows the homeowner to pay the same rate every month for the 15, 20, or 30 years of the loan’s term and budget their finances around this set amount accordingly. In exchange for this non-adjustable rate, the rate is itself a little bit higher than with an adjustable rate mortgage. The loan criteria for a fixed rate mortgage are also a bit more stringent than with other loan options. However, qualified home buyers almost always choose this loan option because they know an FRM is not subject to changes in the market.

If you want to find out if you qualify for a fixed rate mortgage, please contact us today. We’d be more than happy to assist you.

Adjustable Rate

adjustible_rateAdjustable rate mortgages (ARMs) are generally preferred by home buyers that have specific short term needs and goals, because they generally offer a much lower starter interest rate than fixed rate mortgages. A lower introductory rate means lower monthly payments, which can mean a home is more affordable for the borrower, or that they have extra money in the initial period to use fixing up the house. However, borrowers with ARMs should be comfortable with changes in their mortgage payments. After a specific set term, usually 3, 5, or 7 years based on a 30 year amortized loan, the interest rate will be subject to fluctuation and adjustment by your lender. This is to compensate the lender for the risk associated with charging you much less than the current market rate in the beginning.

If you feel an ARM may be right for your mortgage and lending needs, please contact us to discuss your financial situation and desires.