Fixed vs. Variable Rates

Option One Mortgage originates many types of loans for its customers. Some of these are adjustable rate loans and some of them are fixed rate loans. It is important for consumers to know the difference.

A fixed rate mortgage loan has an interest rate that is set at the beginning of the loan period and never changes. While other factors, such as property taxes, may change the amount of your monthly payment, it will never change due to a change in interest rates.

An adjustable rate mortgage loan has an interest rate that will change as the interest rates of a certain index (such as the index for Treasury securities) change. Therefore, your monthly payment will not necessarily be the same for the entire life of the loan.

Which of these choices is right for you depends on what is most important to you in a loan. Are you nervous about the market and unwilling to hedge a risk with interest rates that can fluctuate either up or down? Then a fixed rate is probably the better choice. Are you slightly less risk averse than the average consumer, and do you want to be able to take advantage when interest rates trend downward? Then an adjustable rate might be right for you.

Adjustable rate mortgage loan originated by Option One Mortgage will be clearly explained by your loan officer. He or she will tell you, as specified in the loan agreement, when and how the interest rate can change. Remember, it is best not to assume that today’s low interest rates will be at the same state tomorrow. Instead, be prepared for any changes that might affect the amount of your monthly payment.