A Fixed Rate Mortgage is a mortgage where the interest rate does not change througout
the loan.  The most common fixed rate loan is a 30 Year Fixed.  With a fixed rate loan, your
payment stays exactly the same with all 30 payments if you were to keep the loan all the
way through the loan term.  For example, your mortgage payment on a $100,000 loan at an
interest rate of 6.5% would be $632.07 principal and interest.  That payment will not change
for the 30 years or whatever the term is on the loan you choose.  

An Adjustable Rate Mortgage does not have the same payment through the whole loan
term.  Most adjustables are fixed for a certain time frame such as 5 years then becomes
adjustable for the remaining years on the mortgage.  For example, you might have a
$100,000 loan at an interest rate of 5.75% which makes your payment $583.57.  On a 5
Year Adjustable rate mortgage, your payment would remain at $583.57 for the first 5 years.
After your 60th payment (5 years), your payment could adjust up or down depending on
what the interest rates are doing at that time. These loans are favorable to some
homeowners because an adjustable rate traditionally carries a lower interest rate than a
fixed rate due to the risk of not having a certain payment throughout the loan.  This loan is
also favorable if you will not be keeping the mortgage for more than the 5 years.    
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Fixed Rate vs Adjustable Rates
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Fixed Rate Pros:
Your Mortgage payment and interest rate stay the
same for the length of the loan.

Fixed Rate Cons:
You will pay a higher interest rate so the lender
will commit to lending you the money for a fixed
period of time.

Adjustable Rate Pros:
Your interest rate is lower which may allow you to
qualify for a higher loan amount.

Your principal and interest payments are lower

If your loan has no prepayment penalty, you can
refinance into a fixed rate loan at a later date.

Adjustable Rate Cons:
It is difficult to budget your bills because your
mortgage can change from month to month

If your rate rises more than 1 or 2 percent, your
adjustable rate may be higher than a fixed rate
loan.
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