There are three basic types of mortgages: fixed rate, adjustable rate, and hybrid. A fixed rate mortgage will carry an interest rate that won’t change over the life of the loan. The most common fixed rate mortgages are for terms of 30 or 15 years. They are also available for 10, 20, or 25 year terms. An adjustable rate mortgage will carry an interest rate that will change on a periodic basis (1 month, 6 months, 12 months, etc). They may fluctuate higher or lower depending on the economy and the market index that the rate is tied to. Common indexes include the 6-month LIBOR and the 10-year Treasury. There is also a hybrid adjustable rate mortgage. This is a mortgage that has an initial period (up to 10 years) where the interest rate is fixed. Thereafter, the mortgage will convert to an adjustable rate mortgage and will fluctuate depending on the index it is tied to.
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