First Weber Blog.

If you are thinking of buying a home, most likely you’ll need to take out a mortgage loan.  You are probably familiar with an auto loan, but home loans are different.  Not only are they usually for a lot more money, but they are typically for much longer terms.

Here are two of the most popular types of home loans:

Fixed-Rate and Adjustable Rate

So, what’s the difference?

FIXED RATE MORTGAGE

• Interest rate and principal and interest remain the same throughout the loan period.
• Allows you to rely on predictable payments
• Provides protection if mortgage rates rise
• A good choice if you think you’ll live in the home a long time
• Fixed rate mortgages can be obtained in a variety of length, 30 year and 15 year fixed rate loans are popular

Things to consider:

• Over the course of a long term loan like a 30 year, the overall interest payment will be larger because it took longer to pay off.
• Short term loans, such as a 15 year, will have more expensive payments per month because you are paying off the loan in half the time.

ADJUSTABLE RATE MORTGAGE (ARM)

The initial interest rate on an ARM will be lower than a fixed rate loan.

Your principal and interest payment will remain fixed for a certain amount of time, such as 3 or 5 years. (3 year ARM or 5 year ARM)

After that period of time, depending on the loan, your payments can/will adjust annually.

There is a cap on  how high the rate can go up for some protection.

This may be a good option for short term purchases.

Things to consider:

Unlike the fixed rate loan, your payments, while they start out lower, can rise.

These increases may happen every year after the initial fixed period.

First Weber sells real estate throughout Wisconsin: Metro Milwaukee and Southeastern WI, South Central Wisconsin/Greater Madison, Southwest Wisconsin, Western WI, Central Wisconsin, Northeast Wisconsin and Wisconsin’s great Northwoods. You can start searching for Wisconsin real estate and Wisconsin real estate agents at firstweber.com