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This is the official blog of Citizens National Bank, providing information about personal banking, business banking, mortgage loans, business loans, financial management and helpful tips for consumers located in northern Michigan.

Fixed vs. Adjustable Rate Mortgage Loans - What's the Better Option?

By Nancy Lindsay - Thursday, March 12, 2015

Fixed vs. Adjustable Rate Mortgage LoansWith the recent announcement of our No Closing Costs program for home mortgage and business loans, you can imagine that we're seeing quite the increase in loan interest from our customers. But when trying to answer the question "which is better for me, a fixed or variable rate loan" the answer really is "it depends."

"It depends? That's not an answer, " you may be saying to yourself... and we agree. But, before we can tell you which type of interest rate is best for you, we first need to get a bit more information to see which type of loan program really is the best for you and your particular situation.

In today's low-rate interest environment, the popularity of an adjustable (also referred to as a variable) rate loan has really fallen off. Typically an adjustable rate loan is great when the rates are high, but the expectation is they will be coming down in the next few years. So if you are interested in buying a home, but don't want to lock in to a rate that may be a bit higher than what you were hoping for, a variable rate loan will give you the ability to take advantage rate drops as the loan adjusts down with decreasing rates. This helps reduce the P&I (principal and interest) part of your loan payment and save you money every month.

However, with loan rates remaining low and very affordable, most of our loan customers opt for a fixed rate to lock in their payment over the 10, 15 or even 30 year term of the loan. This helps make budgeting easier because you know the P&I part of your payment will remain constant (but keep in mind if you have an escrow account that is collecting funds for things like taxes or insurance that your payment may go up as these become more expensive).

The only real "down side" to a fixed rate loan is that you "pull the trigger" too soon and lock in a rate that may be even less a year or two. When rates were falling consistently a few years ago, many customers refinanced their loans several times with us, taking advantage of even better rates (and lower payment amounts). However, with CNB's new No Closing Costs program, if rates drop the road, you can refinance to lock in that lower rate WITHOUT any closing costs! Now that's really the best of both worlds!

Still Have Questions?

We know this information is just "scratching the surface" and there are lots of other factors that influence whether a fixed or adjustable rate is best for you. In reality, it's always best to chat with a loan professional to be absolutely sure you have your questions answered and are getting the right loan for your needs. During the consultation process we'll take the time to ensure that we understand your individual circumstances.

The best part is you've got the option of submitting your application information to us the "old fashioned" way on paper, or you can complete our online home mortgage application to get your information to us, and then we can get together to chat further! Either way, once we get your application and can talk further we'll ensure that you get the right loan for your needs... oh yes, did we mention that you won't have to pay any closing costs either?

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