Question

What is an advantage of an adjustable-rate mortgage?

Answer 1

The obvious advantage of an adjustable-rate mortgage is that they carry lower interest rates during the fixed period of the loan. ... By the end of the 5-year fixed period, the borrower will have made a much larger dent in their balance than the borrower who uses a 30-year fixed mortgage.

Answer 2

A variable lower rate structure and early payments during the loan term are two benefits of adjustable-rate mortgages.

What is mortgage?

A mortgage is an arrangement that grants the right to seize property between a borrower and a lender. Interest is added to any borrowed money that is not repaid by the borrower.

There are various types of mortgage are adjustable-rate mortgages, government-insured mortgages, conventional mortgages, fixed-rate mortgages and jumbo mortgages.

As payment for taking on the interest rate risk, an adjustable rate mortgage often has a lower beginning rate than a fixed-rate mortgage.

Hence, the significance of the mortgage is aforementioned.

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