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Fixed vs. Variable Rate: Which Is Better?

December 20, 2023
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Is a fixed, variable, or hybrid mortgage rate best for you?

Preparing your mortgage payments is a big deal; after all, it can take 30 years or more to pay. One of the biggest decisions regarding it is whether your mortgage will have a fixed interest rate or a variable interest rate. A fixed-rate locks you into an exact percentage for your monthly payments based on the current market rate; a variable rate changes periodically according to the market. Fixed vs. variable rate: which is better for you?

Fixed-Rate Mortgages

One of the nicest attributes of fixed-rate mortgages is the stability. There is no question what you will have to pay every month. There is no risk of having to pay more over time, especially in a time of instability and inflation. 

Your lender can calculate how much you would pay per month depending on if you have a 30, 20, or 10-year loan. Your income, credit score, and down payment will determine what you can afford and what kind of mortgage rate works best for you. Additionally, it is possible that you could negotiate for a lower interest rate later on if it falls drastically.

Hybrid Adjustable-Rate Mortgages

On the other hand, the most popular form of adjustable-rate mortgages, also known as ARMs, is the hybrid model. You can have a fixed rate for the first few years, followed by an adjustment based on the market periodically. Standard options include 5/6, 3/1, 7/1, and 10/1. To interpret, 5/6 means that you pay a fixed rate the first five years, followed by an ARM that is adjusted every six months.

Adjustable-Rate Mortgages

Adjustable-rate mortgages put you on the adjusting path from the start. It is wise to go with this method if you are confident about the following:

  • That you will get a raise 
  • That the market rate will drop
  • That you will sell or refinance before the interest rate rises

Ways to Save on Your Mortgage Rate

If you intend to build your house, Ameri-Star has plenty of ways to cut down your mortgage, including the rates. Read more about how to save on your mortgage and financing your new home.

Let Ameri-Star Homes Build Your New Custom Home!

Ameri-Star Homes was built on the idea that a home is not complete until the homeowner is 100% satisfied. That’s right, completely satisfied homeowners. Whether you want a home built on one of our home sites or on your own land, count on the same high quality from Ameri-Star. We have set out to exceed all your expectations of integrity, affordability, and customer satisfaction. Build lasting memories for years to come with Ameri-Star Homes. 

For more information, contact us today at 410-590-1000 or through our contact page. For more helpful custom home tips, keep in touch with us through Facebook, Twitter, LinkedIn, and Pinterest!