What Are the Differences Between ARMs and Fixed-Rate Mortgages?

What Are the Differences Between ARMs and Fixed-Rate Mortgages?

If you’re like most people buying a home for sale in Jasper, Huntingburg, Evansville or another Indiana community, you know you have a lot of options when it comes to mortgage products – and among them are fixed-rate mortgages and adjustable-rate mortgages, or ARMs. So what are the differences between ARMs and fixed-rate mortgages, and what’s right for you? This guide explains. 

What Are the Differences Between Fixed-Rate Mortgages and ARMs?

There are two main types of mortgages: fixed-rate and adjustable-rate. You should talk to a financial professional before you decide which type of mortgage is right for you, but here’s a quick run-down on the differences between them. 

Fixed-Rate Mortgages

In a fixed-rate mortgage, your interest rate stays the same for the life of your loan. If you take out a 30-year fixed-rate mortgage at 3.9 percent interest, that’s what your interest rate will be today, next year, and 29 years and 11 months from now. The only way to change your interest rate is to refinance your home – that is, take out a new mortgage. 

The upside is that you always know what your monthly mortgage payments will be (not accounting for property tax, which can change and can affect your payments when your lender is involved). That way, you can budget accordingly. 

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1700 N Newton St.
$1,200,000
  • 5 Bedrooms
  • 6 Bathrooms
  • 5,748 Sq Ft
  • 8.870 Acres

1700 N Newton St. Jasper, Indiana

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Listing courtesy of Larry Carpenter III from Carpenter Realty LLC.

515 N Weisheit Drive W
$596,000
  • 4 Bedrooms
  • 4 Bathrooms
  • 5,029 Sq Ft
  • 2.295 Acres

515 N Weisheit Drive W Jasper, Indiana

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Listing courtesy of Stacey Thieman-Wright from THIEMAN REALTY.

4288 W Anya Court
$469,000
  • 4 Bedrooms
  • 5 Bathrooms
  • 3,849 Sq Ft
  • 0.557 Acres

4288 W Anya Court Jasper, Indiana

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Listing courtesy of Linda Schroering from CENTURY 21 SCHROERING REALTY.

4807 Killarney Court
$425,000
  • 6 Bedrooms
  • 4 Bathrooms
  • 3,780 Sq Ft
  • 0.570 Acres

4807 Killarney Court Jasper, Indiana

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Listing courtesy of Jake Mauntel from American Dream Mauntel Realty.

307 Newton Street
$400,000
  • 4 Bedrooms
  • 2 Bathrooms
  • 3,490 Sq Ft
  • 0.353 Acres

307 Newton Street Jasper, Indiana

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Listing courtesy of Tama Stemle from RE/MAX Local.

4180 Timberpoint Court
$279,900
  • 3 Bedrooms
  • 5 Bathrooms
  • 2,867 Sq Ft
  • 0.800 Acres

4180 Timberpoint Court Jasper, Indiana

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Listing courtesy of Melody Faulk from RE/MAX Local.

1443 Dexter Court
$274,900
  • 3 Bedrooms
  • 2 Bathrooms
  • 1,365 Sq Ft
  • 0.490 Acres

1443 Dexter Court Jasper, Indiana

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Listing courtesy of Adam Boyd from BOYD REALTY & DEVELOPMENT LLC.

3422 Lakeside Dr Drive
$244,900
  • 3 Bedrooms
  • 3 Bathrooms
  • 2,564 Sq Ft
  • 0.440 Acres

3422 Lakeside Dr Drive Jasper, Indiana

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Listing courtesy of Diana Feuerbach from Key Associates of Rockport IN.

1486 3rd Avenue
$237,000
  • 4 Bedrooms
  • 3 Bathrooms
  • 2,577 Sq Ft
  • 0.900 Acres

1486 3rd Avenue Jasper, Indiana

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Listing courtesy of Steve Lukemeyer from F.C. TUCKER EMGE.

214 W 9th Street
$219,000
  • 4 Bedrooms
  • 2 Bathrooms
  • 2,100 Sq Ft
  • 0.110 Acres

214 W 9th Street Jasper, Indiana

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Listing courtesy of Ruger Kerstiens from F.C. TUCKER EMGE.

903-3 Reyling Drive
$199,900
  • 2 Bedrooms
  • 2 Bathrooms
  • 1,266 Sq Ft

903-3 Reyling Drive Jasper, Indiana

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Listing courtesy of Kara Hinshaw from Key Associates Signature Realty.

610 E Fourteenth Street
$199,500
  • 4 Bedrooms
  • 2 Bathrooms
  • 2,280 Sq Ft
  • 0.130 Acres

610 E Fourteenth Street Jasper, Indiana

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Listing courtesy of Ryan Craig from RE/MAX Local.

1031 DORBETT Street
$197,000
  • 2 Bedrooms
  • 3 Bathrooms
  • 2,568 Sq Ft
  • 0.190 Acres

1031 DORBETT Street Jasper, Indiana

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Listing courtesy of Connie Thewes from HOFFMAN & MULLEN REALTY INC.

1766 W State Road 56 Highway
$195,000
  • 3 Bedrooms
  • 2 Bathrooms
  • 2,440 Sq Ft
  • 0.920 Acres

1766 W State Road 56 Highway Jasper, Indiana

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Listing courtesy of Linda Schroering from CENTURY 21 SCHROERING REALTY.

6142 N Old Rd. 45
$189,000
  • 2 Bedrooms
  • 1 Bathrooms
  • 1,146 Sq Ft
  • 1.130 Acres

6142 N Old Rd. 45 Jasper, Indiana

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Listing courtesy of Larry Carpenter III from Carpenter Realty LLC.

Adjustable-Rate Mortgages

An adjustable-rate mortgage has an interest rate that varies. Typically, you get a below-market interest rate; that means it’s lower than what most people are paying for fixed-rate mortgages. 

The initial interest rate – the one you pay during your introductory period, which is usually 3, 5, 7 or 10 years – stays the same. After your introductory period, your interest rate will adjust based on current market conditions; it adjusts at specific intervals, so you’ll know when your interest rate is going to change.

Usually, there’s a cap on the amount of interest your lender can charge you on an adjustable-rate mortgage. Additionally, if you find that your interest rate gets too high, you may be able to refinance your loan and secure a lower interest rate.

Related: Can you buy a FSBO when you’re working with a real estate agent?

How Do You Know Whether a Fixed-Rate or Adjustable-Rate Loan is Right for You?

The only way to tell what type of loan is right for you is to talk to a financial professional. You should consider:

  • How much money you have saved for a down payment
  • Whether you can afford to make mortgage payments if interest rates go up, which they’re likely to do
  • Whether you intend to live in the same home for a long time or you intend to sell it fairly quickly

Are You Thinking of Buying a Home in Dubois County?

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Welcome to this beautiful craftsman style two story home in Hunters Crossing in Huntingburg! You're greeted by amazing curb appeal and a covered front porch, and you enter the home into a spacious entry way. The main living space is completely open concept and perfect for entertaining! The light & bright living room features two large windows, and gorgeous laminate plank flooring runs throughout the entire main floor. The kitchen has an island, stainless steel appliances, and plenty of cabinet storage. On the main floor, you'll also find a half bath and a large laundry room. The primary bedroom features a private en-suite bathroom with double vanity and shower. There are two additional bedrooms, along with a bonus room that could be a 4th bedroom. You'll also love the large back yard! $290,000 Active

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