Why are vaiable rates lower than fixed rates in general?

Variable rates are lower in general to fixed rates because the lending institution is guaranteeing that you can borrow a set dollar amount for a restricted period of time. Ask yourself this. If you were lending someone else money, would you more interest on someone who needs your money for a short period or long period of time? Happy Groundhog Day!

Actually, this is a very good question. If your time line is such that you anticipate selling the home within a shorter period of time, you should NOT, in most cases, take a longer term loan. A 30 year fixed rate loan is usually priced higher than a loan with a shorter term, because the lender is guaranteeing the rate for all thirty years. If you are looking at moving in say, 4 years, taking a loan with a rate that is fixed for either 3 or 5 years will have a lower (sometimes much lower) rate because the lender is only guaranteeing the rate for 3 or 5 years, then the rate begins to adjust to market conditions. Another thing to consider is if your time line is shorter, you may benefit from a "No-Cost" loan. This is why you want to work with a local Mortgage Banker/Broker, rather than one of the big banks. Unlike a bank employee, who is most likely just an order taker, a Mortgage Broker/Banker is Trained, Tested and Licensed in all aspects of Mortgage Origination. He/She will have access to loan products of many lenders, not just those of one bank, and can properly guide you. But more importantly, He/She is trained to take a look at the various different options available to you and guide you into the one that makes the best sense for your situation. Don't forget to check out your selected Mortgage Originator at the National Mortgage Licensing System at www.NMLSConsumerAccess.org ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ www.LoansA2z.com

In general, all loans are priced on a risk to reward factor for the lender. If you are 100% sure that you will be moving then you shouldn't pay the higher interest rate. But you never know what the future has in store and I generally advise clients on a fixed rate mortgage for this reason.

Jody,Fixed rates are typically based upon Mortgage Backed securities sold on the stock market.Adjustables are based upon different things like the LIBOR which is an index.Indexes can change regular and can bring greater profit to the investor therefore they are willing to sell the money cheaper initially to get the chance to charge you more later.Any questions in the future we would be happy to answer them for you www.delinefinance.com

Hi Jody, with rates at historic lows, I would advise to go with a fixed rate, as others have commented no one knows what the futures holds, maybe you don't move, and maybe you can't get the price you were hoping for and would rather rent till the pricing comes back your way. Variable rates are based off of a much shorter period of time and are usually lower than long term fixed rates..usually about a 1% difference, but unless you are 110% sure you are moving and selling at whatever price you can get, I would again grab a 30 yr fixed in the 3's and put your mind at ease...Ralph@absolutelowrates.com

You need to consider how long you anticipate being in your home to properly be advised.. if you know that you will be moving and selling your home in the next 3 to 5 years, then by going 3 to 5 year ARM is ideal. You benefit from the lower rate, and you get the lower payment.. if you know you will be in the home longer than the 3 to 5 years, then a fixed rate mortgage is probably your best bet.. however to know for sure, contact a local mortgage broker, not a bank and apply with them... they can type up a total cost analysis for both products and show you which will be the best way for you to go.. WilliamAcres.com