Knowing what kind of mortgage to choose as a first-time homebuyer in Arizona can depend on what knowledge is available about Arizona adjustable mortgage rates, as well as fixed mortgage rates. When it's time to choose between an adjustable and a fixed-rate mortgage, you may run into trouble if you're not armed with the right information.

Where Arizona Adjustable Mortgage Rates Apply

Also known as a variable rate mortgage, adjustable rate mortgages (ARMs) are a kind of mortgage that changes with an index that is tied to present market conditions. The main benefit for an Arizona homeowner with an ARM contract is the fact that the interest rate is fixed for a pre-determined period of time, usually offered at 1, 3, 5, 7 and 10 years. After this period, Arizona adjustable mortgage rates change along with the index. Lenders do not set this index. Instead, it is determined by the Federal Reserve along with the economic interest rates.

Fixed rate mortgages are great for those wanting to have consistency with their payments. Over the entire lifetime of the payment period, no matter how much the Federal interest rates flux, your fixed rate payment will stay the exact same as when you first set up the mortgage. This applies conveniently to long-term mortgage notes (20 or 30 years for example). Going with Arizona adjustable mortgage rates is an advantage if you plan on having the property for a short period of time (five years or so).

Consider that the initial payment made for a fixed rate mortgage is generally two to three percent higher than the initial payment for an adjustable rate mortgage. Lenders' fees also tend to be higher for arranging a fixed rate than for an adjustable rate. Also, were the house to be sold in the future, fixed rate mortgages are "due on-sale"; that is, the mortgage cannot be passed over to the next buyer.