What Are Fixed-Rate Products?

What Are Fixed-Rate Products?
For most people, the greatest benefit of fixed-rate loans is their predictability. Your payment (principle and interest payment) will remain the same from your first payment till your last. While fixed-rate loans tend to have higher rates than adjustable-rate loans, people place great value on the psychological comfort of this predictability. Why then would someone ever choose an adjustable-rate mortgage (ARM)? Home buyers often choose ARMs because the lower rates (a) can be easier to qualify and (b) may allow them to get a larger mortgage. Beyond this situation, an ARM product makes sense if you know you will only be in the home a short period of time. The increasingly popular 3/1, 5/1, 7/1 and 10/1 ARMs are good choices for people who expect to move or refinance their home, before or shortly after the adjustment occurs.
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