DBA For James B. Nutter & Company NMLS 2067

Types of Mortgage Rates: Fixed Rate vs Adjustable Rate

At Nutter, we offer a variety of mortgage programs to suit every borrowers specific needs. When choosing which type of home loan is best for you, one of the most important features to consider is the type of interest rate that will be used - a fixed rate or an adjustable rate.

Fixed Rate Mortgages

Fixed Rate is just what the name implies, the interest rate for your monthly mortgage payment remains the same for your entire loan term (the length of your mortgage). With predictable monthly payments a fixed rate mortgage offers you consistency - giving you and your budget peace of mind.

Fixed Rates are available for loan terms of either 10, 15, 20, or 30 years.

Reasons for a fixed rate:

  • If you plan on staying in your home for a long time (generally 5 years or more)
  • If you want to avoid the risk of higher interest rates in the future
  • If you prefer the stability of a fixed monthly mortgage payment that doesn’t change over the entire loan term

Adjustable Rate Mortgages (ARMs)

Adjustable Rate Mortgages (ARMs) are 30-year loans in which the borrower makes an initial monthly principal & interest payment (P&I) for a period of 1, 3, 5, 7, or 10 years, depending on which ARM term option you choose. The interest rate during this initial period is usually lower than that of a fixed rate loan, saving you thousands and significantly reducing the cost of your mortgage - which is one of the many benefits of choosing an ARM.

At the end of the 1, 3, 5, 7, or 10-year period, your rate “adjusts” up or down each year thereafter based on market conditions. Each year, the amount of your interest rate is determined by adding the Index (e.g., 1-year LIBOR rate) plus a Margin (e.g., 2% or 2.25%).

ARMs are usually named by the length of time the interest rate remains fixed and how often the interest rate is subject to adjust thereafter. For example, a 5/1 ARM, the 5 represents the initial 5-year period your interest rate remains fixed, while the 1 shows that the interest rate is subject to adjust once per year thereafter.

Reasons for an adjustable rate:

  • If you plan to move before the end of the initial introductory fixed rate period, so you aren’t concerned about the possibility of a rate increase
  • If you want an initial monthly payment lower than a fixed rate mortgage usually offers
  • If you think interest rates might go down in the future

What happens if interest rates start to increase?

Fortunately, ARMs are capped - giving you some built-in protection by limiting how much your interest rate can go up or down each year (2% for Conventional ARMs, 1% for FHA/VA ARMs), and over the life of the loan (6% for Conventional ARMs, 5% for FHA/VA ARMs).

Should I choose a long term or short term?

Your loan term represents the number of years which you pay back your home loan. A loan with a shorter-term will generally offer a lower interest rate, meaning you’ll pay less in interest over the life of your loan. However, longer-term loans offer lower monthly payments. Use our easy-to-use mortgage calculators to help calculate what loan term works best for you.

Calculate Mortgage Payments

Check out today’s mortgage rates and use our Home Loan Calculator to see what works best for your situation when you purchase a home with Nutter.

Or, use our Refinance Calculator to see how much you could save by refinancing your existing home loan with Nutter.

Calculate how much money is available from your home using our Reverse Mortgage Calculator for those homeowners 62 years and older ready to refinance with our Reverse Mortgage program.

The Benefits of Getting a Loan from Nutter Home Loans

  • We are one of the largest privately owned mortgage banking firms in the country.
  • Dedicated to borrowers nationwide since 1951. We’re licensed in all 50 states.
  • We have an A+ rating with the Better Business Bureau and believe in “If it’s not good for the customer, it’s not good for us.”
  • Our quick and easy online application process leaves you with less paperwork and more time for everything else. Plus, you can manage your mortgage online through our Customer Portal.
  • We offer some of the most competitive rates, including No Closing Cost Loan options - saving you money now, and in the future.
  • Our team of Home Loan Experts (non-commissioned, too!) are available via chat, email and phone to help you understand the details and whether a fixed rate or adjustable rate mortgage is right for you.
  • We pride ourselves on having the best customer service in the industry – even after you close.

Sound a little complicated? Well, you’ve come to the right place.

Since 1951, we’ve helped people save hundreds, or even thousands of dollars a month, when they purchase or refinance their mortgage with Nutter.

Call 1-800-875-7334, send us an email or chat with us online and our team of non-commissioned Loan Officers will answer all your questions.

Additional Resources