A fixed rate mortgage is one where the interest rate remains the same throughout the entire loan term. An adjustable rate mortgage, on the other hand, varies according to your income and credit score. You can choose the type of mortgage that best fits your needs by comparing the interest rates offered by various lenders. Here are some things to consider when making a decision between a fixed rate mortgage and an adjustable rate mortgage. Neither of these two types of mortgages is right for everyone.

## Interest rate on a fixed-rate mortgage is fixed for the entire term of the loan

A fixed-rate mortgage has a lower interest rate and remains constant throughout the term of the loan. Variable-rate mortgages earn higher interest, but are not fixed. They move up and down with the market. A fixed-rate mortgage’s interest rate remains fixed for the entire term of the loan, preventing any increase or decrease in payment amounts. This is important to keep in mind, as higher interest rates increase your payment amounts.

## Interest rate on an adjustable-rate mortgage is variable

When you take out an adjustable-rate mortgage, you are making a long-term commitment to repay the loan at a given interest rate, which can change over time. The interest rate on an ARM is calculated using several indexes. These are economic indicators that will determine how much your interest rate will increase or decrease. The changes in these indexes are usually measured in basis points, which are special units used in the financial market. The broad Treasury financing rate, which is the successor to LIBOR, is the most common index. This index is derived from risk-free securities, such as the US Treasury.

## Interest rate on a fixed-rate mortgage is based on your credit score

Your credit score is one of the most important factors in determining the interest rate on your fixed-rate mortgage. A good credit score is 주택담보대출 indicative of a low risk, which typically means a lower interest rate. A low credit score, on the other hand, means a higher risk, which means a higher interest rate. While the lower rate is attractive, it will not always save you money. Your credit score is important to lenders because it shows them your likelihood of making your mortgage payments.

## Interest rate on a fixed-rate mortgage is based on your income

The interest rate on a fixed-rate mortgage is set based on your income and other factors. While the formula used by different lenders will vary slightly, there are several key factors that can affect your interest rate. The current federal funds rate, the short-term rate set by the Federal Reserve, and other factors such as the number of employees underwriting your loan. Your qualifications for a mortgage are also a factor, as your income and debt may make you more or less attractive to lenders.

## Penalties for refinancing a fixed-rate mortgage

A 3 month interest penalty is a more straightforward calculation than the difference in interest rate. Multiply the current mortgage balance by the new interest rate. Subtract three months from this amount to get the interest penalty for one month. In a simple example, let’s say that Sarah locked in a 5-year fixed mortgage rate with ING on February 1st, 2009. As of September 30th, 2009, she still owes $300,000.