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Fixed vs. Adjustable

Fixed rate Pros-

Your mortgage payment and interest rate stays 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. If interest rates fall significantly, you maintain your current rate. There are sometimes prepayment penalties on fixed rate mortgages.

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 mortgage at a later time.

Adjustable rate cons

It is difficult to budget your bills because your mortgage may change month to month. If rates rise more then 1 or 2 percent and stay elevated, your adjustable rate loan will probably cost you more then a fixed rate.