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Should I choose a fixed rate or adjustable rate loan?
Fixed rate loans have a stated interest rate that does not change over the life of the loan,
whereas the rates on adjustable rate loans are linked to an index and change as the index rate changes. Many mortgages, such as a
5-Year Fixed (30 Year), start as a fixed rate loan and then convert to an adjustable rate. Adjustable rate loans have more risk due
to the possibility that the interest rate could increase. However, because you are assuming some of the risk the lender will generally
reward you with a lower interest rate. These loans are best for borrowers who do not plan on keeping the loan for the full term.
What is the difference between a fixed-rate loan and an adjustable-rate loan?
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