Choose a rate structure with intention.

Fixed-rate mortgages

A fixed-rate mortgage keeps its interest rate for the life of the loan under its terms. Principal and interest are generally predictable, but the total monthly housing payment can still change when taxes, insurance, mortgage insurance or association dues change.

Payment stability can make a fixed-rate loan easier to plan around, especially when you expect to keep the mortgage for a long time.

Adjustable-rate mortgages

An adjustable-rate mortgage has a rate that can change according to the loan’s terms. Many have an initial fixed period followed by scheduled adjustments. The index, margin, adjustment frequency and caps determine how changes work.

An initial payment is not a guarantee of the future payment. Review what happens at the first adjustment and how high the payment could rise under the contract.

Questions before choosing

• How long do I realistically expect to keep this loan?
• Could I afford the payment if the rate adjusts upward?
• What are the index, margin, adjustment caps and maximum rate?
• What does the Loan Estimate show about payment changes?
• Would this plan still work if selling or refinancing became difficult?

Plan for uncertainty

Do not choose an adjustable loan solely on the assumption that you will refinance before an adjustment. Future rates, property value, income and eligibility are uncertain. Ask Harman to compare structures using the full loan terms.