With a fixed-rate loan, your monthly payment never changes for the life of the mortgage. The portion of the payment allocated for your principal (the actual loan amount) goes up, but the amount you pay in interest will go down in the same amount. The property taxes and homeowners insurance will increase over time, but generally, payments on these types of loans vary little.

Have more questions about fixed or adjustable rate loans? Call California Capital Mortgage Company at (916) 456-1000 or email us by filling out the form below. It’s our job to answer lending questions, so we’re happy to help!

During the early amortization period of a fixed-rate loan, most of your monthly payment goes toward interest, and a much smaller part toward principal. The amount applied to your principal amount increases up gradually each month.

You might choose a fixed-rate loan in order to lock in a low interest rate. Borrowers select fixed-rate loans because interest rates are low and they wish to lock in the low rate. For homeowners who have an ARM now, refinancing into a fixed-rate loan can provide greater stability in monthly payments. If you currently have an Adjustable Rate Mortgage (ARM), we can help you lock in a fixed-rate at a favorable rate. Call California Capital Mortgage Company at (916) 456-1000 to discuss your situation with one of our professionals.

There are many different kinds of Adjustable Rate Mortgages. Generally, the interest rates for ARMs are determined by an outside index. Some examples of outside indexes are: the 6-month CD rate, the 1 year rate on Treasure Securities, the Federal Home Loan Bank’s 11th District Cost of Funds Index (COFI), or others.

The majority of ARMs feature this cap, so they won’t go up over a specified amount in a given period of time. Some ARMs won’t increase more than 2% per year, regardless of the underlying interest rate. Sometimes an ARM has a “payment cap” that guarantees that your payment won’t increase beyond a certain amount over the course of a given year. The majority of ARMs also cap your rate over the duration of the loan period.

Most borrowers who choose ARMs do so when they want to take advantage of lower introductory rates and don’t plan on remaining in the home longer than this introductory low-rate period. ARMs can be risky if property values go down and borrowers cannot sell their home or refinance.