What is the difference between “Fixed Rate Mortgage” and “Adjustable Rate Mortgage”?

You want to buy a house by credit. Then, you get two types of credit offers: “Fixed Rate Mortgage” and “Adjustable Rate Mortgage.”

What’s the difference between the two? Which method is more suitable for your finances?

fix rate mortgage vs adjustable rate mortgage

Definition of FRM & ARM

“Fixed Rate Mortgage” (FRM) is a mortgage with a flat rate during the credit period. The consequence of credit is that you pay the principal and interest every month. By choosing FRM, the interest rate you are paying is constant, not affected by Bank Indonesia interest rate fluctuations.

Whereas “Adjustable Rate Mortgage,” (ARM), is the opposite of FRM. This mortgage has interest rates that can change according to the interest rates on the market. In other words, the amount of interest you have to pay can go up or down all the time credit. This adjustment, generally, occurs six months. But it does not rule out the possibility of less than that time, especially in times of crisis.

At a glance, FRM is more profitable than ARM. But, is that really true? Not really. Why? There is some reasons.

Not all constants

Not all FRM payment implementations remain. Usually, there are banks that provide up to 3-5 years of fixed interest rates. But after that period, you are asked to pay with floating-credit. Well, in this phase, the installments that you have to pay are higher than before – according to bank policy.

See Other Expenses Charged

FRM is identical to the monthly installment stability. But, you know, that the cost that you have to spend is far more expensive than ARM? There are banks that enforce FRM during a certain credit period, but actually the fixed price is more expensive.

Those are about the difference between “Fixed Rate Mortgage” and “Adjustable Rate Mortgage”. To get more information about the mortgage you can visit Cenlar Login directly….

So, it is very important to carefully consider all the details of the existing mortgage program. To be wiser, learn about cases that have occurred, so you can make the right decisions. Don’t forget to also use the mortgage calculator… Happy investing!