Ranch Buying Tips: ARMs vs. FRMs

When you’re looking to finance your ranch purchase, fixed-rate and adjustable-rate are the two main mortgage types you will likely avail. The marketplace offers plenty of varieties within these two primary categories. With that in mind, your first step when shopping for a mortgage should be to determine which of these loan types best suit your needs.

Adjustable-rate mortgages (ARMs)

ARMs initially have a fixed rate, which is followed by a number of adjustment periods wherein the rate is adjusted according to the performance of several key indexes. Generally, the initial fixed rate of an ARM is lower than the comparable rate of a fixed rate mortgage, albeit only slightly. Buyers often choose ARMs because it offers them longer terms and more flexible repayment schedules.

Fixed-rate mortgages (FRMs)

FRMs charge a set interest rate that doesn’t change throughout the loan’s lifespan. As such, buyers don’t have to worry about changing monthly payments when they choose this type of mortgage. Although the principal amount and interest paid varies with each payment, the total payment stays the same, which makes budgeting easy.

Most buyers will be recommended to take out an FRM, but each situation is unique. Buyers who want to take advantage of low interest-rate markets will often go for an ARM. A final word: whichever loan you choose, make sure you thoroughly scrutinize all closing costs.


Posted on December 11, 2013, in Business, Real Estate and tagged , , , , , . Bookmark the permalink. Leave a comment.

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