Fixed vs. Adjustable Mortgage Rates

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If you’ve been through the home-buying process before, or started it for the first time recently, you already know that nothing about home mortgages is as quick or easy as we’d probably like. That doesn’t mean, however, that it has to be as difficult or unpleasant as it sometimes seems. With a little preparation and clarity about what’s expected and what you can and can’t control, you can reduce your stress levels substantially. You may even find yourself making better decisions along the way.

Some of the biggest things you’ll be asked to decide involve the loan itself. Home mortgages come in several varieties, but most homebuyers will be looking at a traditional loan in which both interest and principle will be paid each month until the balance owed is zero. Your options will be largely shaped by your current credit score and credit history, but you’ll still have substantial control over three things – who you borrow from, how long you’ll take to pay it back, and whether or not you’ll finance with a fixed rate mortgage or a variable rate mortgage.

Very few of us buy more than a handful of homes over our entire lives. We’re not likely to become experts at it unless we’re doing it as a career or side

business. Many buyers will defer to their realtor when it comes to financing, which makes a certain amount of sense. They know the right people and who’s most likely to help move the process along. On the other hand, a realtor’s primary goal is to close one deal and move on to the next. Taking some time to shop 3 or 4 different lenders can make a world of difference in the loan you end up with, even if you do choose to go with your realtor’s original recommendation.

A longer term means lower monthly payments but more interest paid over the life of the loan. No matter what rate you secure, or whether it’s fixed or adjustable, that rate for 10 years costs you less than the same rate over 20 years. Either costs way less than taking 30 years. Interest of any sort accrues over time; the longer the time, the more interest you’ll pay.

Then there’s how that interest will be determined. Your credit score will greatly impact what actual rates are available to you, but you’ll still have to decide whether to go with a fixed or variable rate. The difference is pretty straightforward on the surface, but as with so many things, it turns out to be a bit more complicated than that.

Fixed Rate Mortgage vs. Variable Rate Mortgage

A fixed rate mortgage, as the term suggests, essentially “locks in” your interest rate for the life of the loan. Fixed rates tend to start off a little higher than adjustable rates but have the advantage of predictability. Barring minor adjustments due to insurance costs or balancing out your escrow account, they allow you to budget for a monthly fixed rate mortgage payment until your loan is paid in full.

A variable or adjustable interest rate mortgage, sometimes referred to as an ARM mortgage, is less predictable. The average market rates used to calculate what lenders will offer change constantly, although most mortgages are structured to avoid subjecting the borrower to quite that much chaos. The most typical structure is the 5/1 ARM, meaning your rate stays the same for the first five years and is subject to adjustment annually each year after that.

With ARM, your house payment can change over time and may go up considerably long before you’re close to paying off your loan. There are also forms of variable rate mortgages in which your payment stays the same but the percentage going towards interest varies along the way, possibly impacting the length of time it takes to pay off your loan rather than the payment amounts themselves.

Variable rate mortgages remain popular, however, for two reasons. First, most lenders start them off at below market rates, meaning they’re cheaper to begin with than a fixed rate loan. This is very appealing for homebuyers who may just be starting out, or who find their resources strapped by the other costs associated with buying a home and moving into it. Second, adjustable interest mortgages have historically proven to be a better deal than fixed rate mortgages. In other words, buyers have ended up paying less on average when taking their chances on an evolving interest rate. That in no way guarantees the same will be true going forward, but it certainly makes the possibility appealing.

An adjustable rate mortgage can also be desirable for borrowers who don’t plan on staying in the home long-term. If you’re buying with the intention of selling again in five years, for example, the lower monthly payments available with ARM may be ideal.

Defining Features

The home mortgage process comes with its own bewildering lexicon of issues and terminology. You should never feel foolish for not knowing all of them already, but you may find it helpful to familiarize yourself with a few as you begin to navigate the process.

Mortgage: Any real estate loan that comes with a specific schedule for repayment and uses the property being purchased as collateral. They generally require a down payment of 3% - 20% and monthly payments which combine interest and principle.

Collateral: Property used to guarantee a loan. If payments are not made, the lender has the right to take control of the property. Because of this, lenders sometimes require insurance or other guarantees of value on the property. They also avoid situations in which the amount owed is higher than the property’s current value.

Amortization: The schedule by which a loan is paid off. Borrowers are typically provided with an “amortization schedule” showing how much of each payment applies towards interest and how much towards principle. Typically, initial payments are mostly interest with the amount going towards principle rising gradually over time.

Interest: The cost of borrowing money, computed as a percentage of the amount borrowed. The bulk of any loan amount is the principle plus interest.

Principle: The amount actually borrowed still remaining to be paid.

Underwriting: Paperwork behind the lending process. Lenders use underwriters to verify your income, assets, and existing debt, and assess the likelihood you’ll be willing and able to repay a loan amount. Underwriters also order appraisals of the property, pull credit reports, etc.

Points: Fees paid to a lender at closing in exchange for a reduced interest rate on the loan (sometimes called “buying down the rate”). The longer you’re likely to own the home, the more paying points up front will save you over time. On a fixed home loan this will lower your monthly payments for the entire length of the loan.

Down Payment: Lump sum paid up front to reduce the amount being borrowed on a home or other major purchase.

Loanry® is here to help you Shop for a Mortgage


Why Loanry?

Whether shopping for a home or navigating the mortgage process, it’s never fun to feel blindsided by new information or caught off guard while a realtor, underwriter, or even the seller sit and politely stare at you, waiting for you to make some sort of decision. We’re not here to make those decisions for you, but we can provide you with tools and information ahead of time in order to minimize those moments you might otherwise feel a bit overwhelmed.

Everything we do here at Loanry, and across the family, is meant to be accessible 24/7, at your convenience and your pace. You may spend several months researching and preparing yourself to get serious about buying a home, or take a long weekend and digest as much as you can in a few long sittings. You can request more information or ask to be connected with a lender at 3 a.m. or on a major holiday and have a pretty good chance of getting a response within 24 hours or less.

Convenience is not just about access or speed or competitive terms. It’s about meeting you where you are and doing whatever we can to take the unknown out of the mortgage process or any of the other financial issues covered across the spectrum. It’s about a foundational belief that if you’re simply given adequate information and options, you’ll do fine making the decisions you need to make.


Buying a home is one of the biggest decisions most of us will ever make. For many families, it’s their single largest investment and source of wealth. That makes every decision about the process a bit more daunting than when we’re buying a car, taking out a credit card, or even going back to school.

The number one goal of any home purchase should be finding the best fit for yourself and your loved ones. Whether you have a spouse, a grandmother, several kids and a live-in nanny or it’s just you and the dogs, homes are all about living safely, comfortably, and to the fullest.

That said, it’s always worth considering the underlying monetary value involved. That is, in fact, part of that quality of life you’re no doubt striving for in buying the home to begin with. Is the property worth what you’re being asked to pay for it? Are the terms of the loan clear and appropriate for your credit history and current income? And is there every reason to believe as you go forward with the process that this loan and subsequent repayment will put you in a better position than you are in now in terms of both your credit score and your net worth?

These can be complicated questions, and you may not have all of the answers. That’s OK. But don’t lose sight of the impact any mortgage has on your finances and credit right now and down the road. Owning your own home and making those payments on time regularly puts you in a stronger position to secure future loans on better terms, meaning it’s easier and costs you less when you need to buy a car, pay for a wedding, or finance an education. It’s not all about money, but it is at least partly about the things that money lets you do.


At Loanry, we’re proud of our track record helping people find competitive rates and connecting them to reputable online lenders. We wouldn’t do it if we didn’t know how many times they choose to utilize the offers they receive as a result, and we love the positive feedback we receive.

But Loanry and the rest of the Goalry family is about more than that. We offer what we like to think of as an extensive “content mall” of related sites –,,,,,,, and of course and Each comes with a library of informational blogs about a range of related topics, along with online tools and resources available on any connected device, whenever you choose.

Our goal is to simplify the worlds of personal and small business finance and help you take control of your finances – and through them, your future. It’s not always going to be easy, but it doesn’t have to be as difficult as it sometimes seems. And you don’t have to do it alone.


Did You Hear?

"The future rewards those who press on. I don't have time to feel sorry for myself. I don't have time to complain. I'm going to press on."

Barack Obama (U.S. President 2009 - 2017)

Educate Yourself

Education Should Come with A Clear Explanation:

Learning About Mortgage Rates is no Different

It’s nice to have choices, but sometimes the sheer number of decisions we’re asked to make can become a bit overwhelming. We can’t make those choices for you, but we can offer you some clarity about the terminology being used, the pros and cons of different methods for computing interest rates, and the usual steps taken once you’ve decided to buy. We believe in plain speaking and simple language, and that’s what you’ll find here.

While we talk about fixed vs. variable rates or compare different amortization tables, the most important thing to remember is that you’re the customer. You don’t have to buy until you’re ready and you don’t have to borrow on terms you don’t accept. You may not be able to get everything you’d like the way you’d like it, but you can absolutely avoid what you don’t want or walk away from anyone unwilling to compromise. It’s all about making informed choices, and we’re here to help whenever you choose.

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Fixed vs. Variable Rate Mortgages Q&A

A mortgage loan can get you into the home of your dreams. Whether you're there to raise a family or live like a bachelor, understanding your mortgage rate options is a must.

Q: What’s a Reasonable House Payment?

Most experts suggest looking at homes that cost no more than 2x – 2.5x your gross annual income. The most commonly cited figure for the ideal monthly house payment is 28% of your gross income that month, although some allow for as much as a third of your income if you include insurance, taxes, and related expenses in the total.

Q: What is “Mortgage Insurance”?

This is a specialized type of insurance that protects the lender if you default on your payments or pass away before the loan is paid in full. It’s a common requirement of many mortgages, and particularly essential if the value of the property is expected to at any point fall below the remaining balance.

Q: How Much Will My Loan Cost?

Online loan calculators let you adjust for purchase price, interest rates, down payments, and length in order to see how each factor impacts the amount due each month and total paid over the life of the loan.

Q: What is “Escrow”?

Escrow refers to any agreement in which a third party holds on to money on behalf of two other parties who have a financial arrangement. In the case of a mortgage, it’s most often a separate fund used to pay insurance and property taxes, which can rise and fall over the life of the loan.

What Counts As A "Good" Credit Score

Most conventional mortgages like to see a FICO score of 620 or higher. That doesn’t mean it’s impossible to get a mortgage with a lower score, but you may have to shop several lenders in order to get satisfactory terms.

Q: How Can I Improve My Credit Score?

Pay your existing debts and avoid taking on new ones. Consider cutting back on optional services or subscriptions or renegotiating your existing cable, cell phone, or other recurring bills. Look for ways to make extra money, even if they seem insignificant, and apply that money to your debt. It takes time to improve your credit, but not as much time as you might think – especially if you start today.

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Find answers to some of the most commonly asked questions here

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We are a marketing lead generator and advertising service designed to provide you with quick and convenient access to third-party lenders.


We are a marketing lead generator and advertising service designed to provide you with quick and convenient access to third-party lenders.


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