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Do I Pay A Higher Interest Rate On A Fixed Rate Mortgage?

By Ann White

When choosing a mortgage, many people are confused as to whether select a fixed rate mortgage or an adjustable rate mortgage. While an adjustable rate mortgage has an initial low interest rate, a fixed rate mortgage may have a higher rate overall. There are several factors to consider when deciding if you will pay a higher interest rate on a fixed rate mortgage.

Initial Interest Rate

The first factor to consider when determining whether you will pay a higher interest rate on a fixed rate mortgage is the initial interest rate that you will be charged. Often times, the initial interest rate on a fixed rate mortgage is 1.00% or more higher than an adjustable rate mortgage. If you get a shorter term fixed rate mortgage, you may be able to get a more comparable interest rate.

Rate After Adjustment

The second factor to consider when determining whether you will pay a higher interest rate on a fixed rate mortgage is the rate you will pay after adjustment. With interest rates at all time lows, now may be the best time to lock in a fixed rate. If you choose an adjustable rate mortgage, you may pay more interest in the long run than if you select the fixed rate option.

Fees

The third factor to consider when determining whether you will pay a higher interest rate on a fixed rate mortgage is the fees that you will be charged. Since adjustable rate mortgages come with more risk than fixed rate mortgages, banks tend to charge higher fees to compensate. These fees are then incorporated in the total annual percentage rate that you will pay.

Related posts:

1. What Factors Determine The Annual Percentage Rate For A Mortgage Rate?
2. Is A Low Mortgage Interest Rate Always The Best Rate?
3. Why Is The APR So Much Higher Than My Mortgage Interest Rate?
4. Can I Save Money With A Fixed Rate Mortgage?
5. What Are The Caps For An Arm Home Loan?