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   Shopping for your loan is just as important as shopping for your new home. There are generally two different types of loans that buyers will go with, this is either a Fixed Rate Mortgage or an Adjustable Rate Mortgage. So what is the difference, and which one makes more sense for you?

   In a conventional fixed rate mortgage, your interest rate will stay the same throughout the entire loan period until your loan is paid off. An Adjustable Rate Mortgage will stay the same from the start until it is set to change in the future. An ARM may be set to change after 5 years (5/1 ARM) or 7 years (7/1 ARM), or whenever the chosen program is set to change. When the rate changes, it will change to the current going market rate. Because it can be slightly riskier, generally an ARM has a slightly lower rate for the buyer. Though an ARM can be riskier, there are margins that protect your future rate from drastically changing. 

   For buyers that wish to stay in their home for over 5-7 years, they typically will go with a fixed rate loan so that it will stay at the current rate for the entirety. Buyers that wish to only live in their new home for a short period of time will typically go with an ARM because the amount of time that they will be owning the home will be less than the set time their ARM will adjust rates.

If you have any questions regarding loans or purchasing homes in Los Angeles, please feel free to reach out to me as I am always here to help!

 

Love your Home, Love your Life.

 

Leah

 

 

 

 

 

 

 

Fixed Rate or Adjustable?

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