Fixed-Rate and Adjustable-Rate Mortgages
https://www.wellsfargo.com/mortgage/loan-programs/fixed-adjustable-rate-mortgage/
These are two of the most popular loan types for buying a home or refinancing your mortgage (including
cash-out refinances). Both options are available for
conventional conforming loan amounts,
jumbo (non-conforming) loan amounts, and
FHA or VA programs.
| Fixed-rate mortgage
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Adjustable-rate mortgage
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- Available in a variety of loan term options.
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- Your interest rate and monthly principal and interest (P&I) payments remain the same for an initial period of 5, 7, or 10 years, then adjust annually.
- Loans available in a variety of longer terms.
- Includes an interest rate cap that sets a limit on how high your interest rate can go.
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- Predictable monthly P&I payments allow you to budget more easily.
- Protection from rising interest rates for the life of the loan, no matter how high interest rates go.
- May be a good choice if you plan to stay in your home for a long time.
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- Typically ARMs have a lower initial interest rate than on a fixed-rate mortgage.
- The interest rate cap limits the maximum amount your P&I payment may increase at each interest rate adjustment and over the life of the loan.
- May provide flexibility if you expect future income growth or if you plan to move or refinance within a few years.
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- The overall interest you pay is higher on a longer-term loan than on a shorter-term loan.
- On a shorter-term loan, the monthly P&I payment is typically higher than on a longer-term loan.
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- Monthly principal and interest payments may increase when the interest rate adjusts.
- Your monthly principal and interest payments may change every year after the initial fixed period is over.
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