Serving Santa Rosa, Escambia, & Okaloosa Counties

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Fixed or Adjustable Interest Rate Mortgage: Which Should I Choose?

There is a lot involved in buying a home. First you must browse listings and find places that you are interested in. Then you narrow the list down to those that best meet your needs and price range. Once you have settled on something, you go through negotiations until you find a price that is agreeable with you and the seller. Then you have to get a mortgage.

The thoughts of getting a mortgage make a lot of people cower in fear. That's because if you've never been through the process before, there is much that you probably do not know or understand. One of the most common questions is whether one should get a fixed or adjustable rate mortgage.

A fixed rate mortgage is one that has an interest rate that remains constant for the life of the loan. That means that your payment is the same each and every month. This type of mortgage is easy to understand and makes budgeting more predictable.

The downside to fixed rate mortgages is that if interest rates are high when you get your mortgage, your interest will remain high as long as you keep the original loan. If you wish to take advantage of lower interest rates in the future, you will have to refinance. That means more paperwork and additional costs.

Adjustable rate mortgages, or ARMs, feature rates that start out low, then are adjusted according to current interest rates after a specified amount of time. The initial rate can be good for anywhere from a month to 10 years, after which it may be adjusted monthly, yearly, or at any other frequency specified in the mortgage agreement.

The biggest advantage of adjustable rate mortgages is the low initial interest rate. This generally means that one can get a larger loan due to the lower payments. ARMs also allow you to take advantage of falling interest rates without having to refinance.

The bad thing about ARMs is their unpredictability. Depending on the mortgage's terms, the interest rate (and your payment) could nearly double in just a few years. This would leave you with a much higher payment than you started out with, and possibly a higher payment than you would have had with a fixed rate mortgage.

Which type of mortgage you should get depends largely on your situation. How long you plan to keep the home and whether your income is likely to stay the same or increase over the coming years are two important things to consider. If you only plan to keep the home for a few years, an adjustable rate might work to your advantage. And if you need low initial payments, an ARM may be the way to go.

If you're looking for a payment that stays constant from month to month, a fixed rate mortgage would be your best bet. If you can get one when interest rates are low, it could save you money compared to an adjustable rate in the long run.


What Our Clients Say...

  • First time selling a home...Leslie is a wonderful agent to work with. This was my first time selling a home and I was apprehensive about it. She was very quick to respond to all my questions and help... View More..
    Erika Santiago

    First time selling a home...Leslie is a wonderful agent to work with. This was my first time selling a home and I was apprehensive about it. She was very quick to respond to all my questions and help me feel comfortable with the process. She has a very welcoming and friendly personality. I enjoyed working with Leslie so much that she is now helping me with a home purchase!
  • Buying my first house...Leslie went above and beyond to help me go about buying my first house. She was very friendly and was always quick to respond to questions I had. This being my first house, I... View More..
    Brian Simmons

    Buying my first house...Leslie went above and beyond to help me go about buying my first house. She was very friendly and was always quick to respond to questions I had. This being my first house, I had many. She went out of her way to make time to help me and I am pleased to tell everyone that is looking to buy or rent a home to contact her. Her friendly smile was contagious, and I will definitely use her again on my next house purchase.
  • Sold our home in 4 days...Leslie was such a joy to work with. She not only knows her stuff, but she is such a sweet person that wants what's best for her clients. She was always willing to drop... View More..
    Whitney Bennett

    Sold our home in 4 days...Leslie was such a joy to work with. She not only knows her stuff, but she is such a sweet person that wants what's best for her clients. She was always willing to drop anything to meet with and/or discuss things over the phone at anytime. She sold our home in 4 days, helped us find a new home, and we were able to have double closings just a few weeks later!
  • Cindy Cotton. I have been the beneficiary of the most incredible real estate firm. That would be Cotton Real Estate. I did not know them before I hired them to list my first home. After that they... View More..
    Constance Stoner

    Cindy Cotton. I have been the beneficiary of the most incredible real estate firm. That would be Cotton Real Estate. I did not know them before I hired them to list my first home. After that they were the ones we contracted with to sell our current home and purchase our next one. They have since sold that one for us and the purchase of the next one. We also bought some additional properties and of course, Cotton Real Estate is who we called. I have referred several people to Ms Cindy Cotton (mother and father-in-laws and good friends), who have had equally great service from them as we feel they are the BEST realtors that can be found. ANYWHERE. They are above board on their precision of the real estate market, will help you at every turn, are so educated about the contracts, what needs to be done, septic permits and inspections, the ever so awful qualifying and loans, and the quality and type of home that will work. I don't just recommend Cotton Real Estate to anyone looking to buy or sell, I would not use ANYONE else! Sincerely, Constance Stoner
  • Leslie was AWESOME! Leslie recently listed my home for rent and had it rented in 2 weeks. She was very responsive and would follow up with me to give me feedback on all showings which I greatly... View More..
    Paula Snow

    Leslie was AWESOME! Leslie recently listed my home for rent and had it rented in 2 weeks. She was very responsive and would follow up with me to give me feedback on all showings which I greatly appreciated because most property managers don't take the time to do this. Leslie found us a great tenant. She was wonderful to work with. We will definitely use her again. Thanks Leslie,
    Paula Snow
  • Excellent Work, Falen! Thank you for your excellent work on the sale of the Berryhill property and the acquisition of the Gulf Road house! Your advice was always well-informed. You made suggestions... View More..
    James & Linda Thompson

    Excellent Work, Falen! Thank you for your excellent work on the sale of the Berryhill property and the acquisition of the Gulf Road house! Your advice was always well-informed. You made suggestions which were useful. You pointed out items we had not considered. You were always professional while also being personable. You are an example for the real estate industry. Truly, Yours, James and Linda Thompson
  • Thank you Falen Haddy!
    My husband and I recently purchased a home in Pace , and Falen Haddy from cotton Real Estate was our realtor. She was amazing! She worked with us around... View More..
    Ashleigh Bowers

    Thank you Falen Haddy!
    My husband and I recently purchased a home in Pace , and Falen Haddy from cotton Real Estate was our realtor. She was amazing! She worked with us around our schedule to see as many homes as we wanted to see until we found THE one. I would recommend Falen and Cotton Real Estate to anyone and everyone!

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