Indiana First Bank offers Fixed-Rate and Adjustable-Rate Mortgages.
A Fixed-Rate Mortgage is a mortgage in which the interest rate does not change during the entire term of the loan. These mortgages are offered in various terms. The only change in payments a borrower may incur would be an increase or decrease in the amounts the lender collects for mortgage insurance, real estate taxes, or property insurance (escrow payments).
A fixed-rate loan "amortizes" the money borrowed over the stated term by paying the interest due and reducing the principal a little each month. In the early years, most of the monthly payment goes toward interest and very little is applied toward the principal. The reverse occurs in the later years of the loan.
An adjustable-rate mortgage (ARM) is a mortgage in which the interest rate changes at predetermined intervals. The interest rate will increase or decrease based upon an index which reflects the current money market rate. The change in interest rate will also change the borrower's monthly payment. To protect the borrower from "Payment Shock", the loan has preset limits as to the amount the interest rate can change both annually and over the life of the loan.