Interest rates on fixed-rate residential home mortgages never change over the life of the loan, no matter how long the term. Fixed rates are preferable if you plan to stay in your home for more than five or seven years. If Massachusetts mortgage interest rates go up, you're protected; if they drop, you can refinance.
Adjustable rate mortgages (ARMs) are pegged to an index such as the variable LIBOR (London Interbank Office Rate) and, therefore, may change upward or downward. You may be able to save on interest costs with an adjustable rate mortgage if you only expect to stay in your home for a few years. For example:
You may find a "5/1" (or 3/1, or other term) ARM with a competitive interest rate. That rate would stay unchanged for the first five years of your loan (the "5" in "5/1"), then reset every year afterward (the "1" in "5/1"). However, you can't predict whether your rate will reset up or down-or by how much. If you're confident that you'll move before your rate resets, an ARM may save you money.
By the way, you can also refinance an ARM to a fixed-rate mortgage if rates go down.
"APR" stands for "annual percentage rate" and is sometimes called the "effective" or "EAR." APR includes interest as well as many other loan costs, points and fees, and expresses them as an annualized rate.
Not all Massachusetts mortgages have the same types of closing costs. Your closing costs may include:
To help you firm up your budget, your home mortgage professional will give you a good faith estimate of your closing costs shortly after you apply formally for your mortgage.
Additionally, portions of your mortgage payments may go toward any or all of these costs:
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