Fixed vs. Variable Home Loans in Illinois - Home Loan Experts with Great Mortgage Rates Serving Colorado, Florida, Illinois, Indiana, Michigan, Minnesota, Tennessee and Wisconsin

Thursday, September 6, 2012

Fixed vs. Variable Home Loans in Illinois

Fixed vs. Variable: Make the Right Choice

The real estate and credit markets continue to evolve rapidly. That makes it more important than ever to select the right home mortgage in Illinois. A little knowledge can go a long way to help you understand available mortgage products offered by United Home Loans and how we can make it easier to meet your long-term financial goals.

Banks and mortgage companies offer literally dozens of mortgage products for everyone from first-time home buyers to vacation home purchasers, and United Home Loans is no different. While the products and terms vary by lender, virtually all are based on two basic mortgage types—fixed rate mortgages and variable or adjustable rate mortgages.

Fixed vs. Variable Rate Home Loans in Illinois

With a fixed rate mortgage, the interest rate—and the monthly payment--remain the same for the life of the loan. While fixed rate home loans in Illinois have terms as long as 40 years, 15- and 30-year mortgages are more common. The major advantage to a fixed rate home loan in Illinois is the ability to predict your housing costs for the life of the loan. If you borrow $150,000 for 30 years, for example, your principal and interest payments won’t change until you repay the mortgage in 2042.

The interest rate on an adjustable rate mortgage (ARM) changes at predetermined intervals over the term of the loan. Adjustable Rate Mortgages in Illinois usually have an initial interest rate that is lower than the rate currently available on fixed loans. That rate changes based on a recognized benchmark such as the Cost of Savings Index (COSI) or the prime rate. The lender typically adds 1% to 3% to the index to determine your rate. For example, it might be possible to get a 30-year ARM at 2.5% interest for the first five years. After that, the loan adjusts annually to a rate 2% above COSI. Monthly payments would be fixed only for the first five years and could change each year thereafter as interest rates change.

Other Home Loan Alternatives For Illinois Residents

Many lenders offer mortgages that go beyond traditional fixed and adjustable rate loans. For instance, many allow you to make lower payments in the early years of the loan by paying interest only. Or you can make more frequent payments to pay off the loan faster.

Picking a payment amount that suits your budget can help self-employed home loan borrowers or those who expect their earnings to rise. Flexible payments are also useful for people who need money for another purpose, such as to repaying other debt or saving for retirement.

In past years, many people sought to repay their mortgage quickly and own their homes debt free. Today, they understand that a fully paid off home worth $500,000 might not be the best use of their money. Even if you can afford to pay cash, borrowing allows you to keep your cash working for you elsewhere.

For more information on Fixed Rate & Adjustable Rate Home Loans in Illinois, contact United Home Loans today or fill out our FREE GET A MORTGAGE QUOTE TODAY form!

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