Fixed mortgage rates are ideal for those homeowners than plan on either living in their home or retaining ownership of their home for an extended period of time, usually the typical 30 year loan life. Other factors affecting the mortgage decision of whether to purchase a fixed mortgage rate or an adjustable rate mortgage (ARM) are the length of the loan and the down payment required from the lender. The longer the loan term and the larger the down payment, the smaller the monthly payment will be. However, the longer the loan term, the more interest is paid overall. Ideally, the set percentage would be low enough to shorten the loan life, thus lowering the overall costs of interest paid.
Typically, rates are lower when a borrower's credit score is higher. The loan with this type of interest allows for the rate to stay at a fixed amount for the entire life of the loan. These types of loans are especially beneficial for those that plan on living in their home for a long period of time. Those that plan on selling their home within 5-7 years should consider the ARM in addition to the loans with fixed mortgage rates.
The ARM or adjustable rate mortgages offers a lower introductory interest percentage, but only for a predetermined amount of time (usually 2, 3, 5, or 7 years). After the allotted time period is up, the interest rate will fluctuate, either increasing or decreasing depending on the national market unlike the fixed mortgage rate. There is a cap (usually 3%) on how far the interest rate can actually fluctuate. This type of loan is great in a time when fixed mortgage rates are extremely high and/or the borrower does not plan on reselling the home or refinancing the home within the 2, 3, 5, or 7 year stipulation agreement.
These interest percentages are sometimes low, and can also be offered in conjunction with an interest only loan. Interest allows the borrower to make monthly payments specifically to interest only. This type of fixed mortgage rate requires self discipline because after a few years, the monthly interest will never decrease, because the principle is not being lowered. It is important to make regular monthly principle payments to an interest only loan when able. If the homeowner's plans on reselling the home within a few years, then the interest only fixed mortgage rates loans may be the best option with maximum savings redistributed into the updating or repair of the property. Overall, the homebuyer must seek God's guidance and blessing upon the house they wish to purchase. Otherwise, the home will be obtained in vain. "He shall lean upon his house, but it shall not stand: he shall hold it fast, but it shall not endure" (Job 8:15).
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