Have you considered a hybrid adjustable mortgage?Written by Syd Johnson
If you’re not sure if you should sign up for an adjustable rate mortgage (ARM) or a fixed rate mortgage, you’re not alone. It is very easy to get excited when thinking about your new home, and then get feel a bit deflated when it is time to start thinking about financing. Part of challenge for any home buyer is to reconcile fact that introductory rates on adjustable rate mortgages can be so low. In fact, they are often lower than market rate, and considerably lower than rates on fixed rate mortgages. Now, you can get an ARM and some of benefits of a fixed rate loan with hybrid adjustable rate mortgage. A hybrid ARM is one where rate is locked in for first few years of loan and then will go back to market rate at end of lock-in period. The lock in period is quoted up front and written into adjustable rate mortgage contract. This period can vary from five years on up. Depending on your credit history, amount of loan, and your experience with your mortgage lender, you can negotiate lock in term as high as eight or eleven years. This type of loan is ideal for anyone who plans to stay in their home for first few years and then move to another place. Couples, young home owners, first time buyers and anyone who is upwardly mobile. The average American spends about nine years in their first home. If you fit into this profile, you can get a hybrid adjustable rate mortgage, get a fixed rate for first five to ten years and then sell home before rate starts to fluctuate again.
| | So which is better fixed rate or adjustable rate mortgage?Written by Syd Johnson
This is a question that keeps coming up when customers start looking at purchasing or refinancing their home. If you look at average 30 or 15 year mortgage, it seems that better mortgage depends on type of customer. The best mortgage is one that fits in your long term budget, won’t use up too much of your monthly income, and gives you a sense of control over your home so you don’t end up house rich and cash poor. Let’s look at basics.A fixed rate mortgage gives you sense of control because you know what your interest rate will be for next 30 years. The only concern is that market rate might go down at some point in future and you will end up paying more than current interest rate. You can change this by refinancing loan to lower your payments and get a lower interest rate. An adjustable rate mortgage allows you to play with market rate knowing that sometimes you will be more than market interest rate, and other times you will be paying slightly less. Overall, if economy stays healthy you should feel like you made best decision and did not overpay for your home.
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