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.