Comparing a Fixed Rate Mortgage to an Adjustable Rate Mortgageby John Hirabayashi CEO
It can be lots of fun shopping for a new home. All the options available to you are exciting. The good news is, you have options with your mortgage as well. Knowing the difference between a fixed rate mortgage and an adjustable rate mortgage, and figuring out which option fits your needs, can end up saving you a ton of money during the life of your loan. Both mortgage types have benefits and the following information will help you decide which works for you.
Adjustable Rate Mortgage – Not for the Faint of Heart
An adjustable rate mortgage has a fluctuating interest rate that depends on the fate of the market at the current moment. This means that the interest rate you begin with isn’t going to be the same throughout the length of your loan. You could end up paying a higher interest rate several years into your loan, but you could also pay a lower rate, too. It all depends on how stable or unstable the market is at the time the rate is set to adjust. This type of loan works well for those that like to take chances (think of it as playing the stock market), or those who plan to own the property for the entire length of the mortgage. Riding out the highs and lows of an adjustable interest rate mortgage for the entire duration of the loan can ultimately save you thousands of dollars.
Fixed Rate Mortgage – Perfect for those that like to Play it Safe
There’s security and peace of mind with a fixed rate mortgage. This type of mortgage has an interest rate that stays the same throughout the life of the loan. The interest rate is figured by the going market rates at the time the time the loan is taken out and remains the same for the duration. For people not planning to own the property for the entire length of the loan, this is a great way to play it safe and keep a little money in your pocket if interest rates sky-rocket. If you’re the type that prefers to know exactly what to expect, a fixed rate mortgage is the one for you.
Which Type of Mortgage is better?
The answer to this question is, it depends. It depends on your situation, your budget, and what you plan to do in the future. One type is no better than the other – it’s simply a matter of which is more convenient for your needs. A good rule of thumb is, if you aren’t sure what the future holds for you in terms of home ownership, stick with a fixed rate mortgage.
For more information on this subject, be sure to contact one of your local lending institutions. The experts there can answer all your questions and help you determine with mortgage loan is right for you.
Created on Dec 31st 1969 19:00. Viewed 0 times.