Comparing a Fixed Rate Mortgage to an Adjustable Rate Mortgage
by John Hirabayashi CEOIt 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.
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Created on Dec 31st 1969 18:00. Viewed 0 times.