Is it better to get a fixed rate mortgage or adjustable rate?
I’ve heard you can get a low rate initially on an adjustable rate but then it jumps up. But I also heard there is a cap on how far it can go and it works out better. How do you choose?
Filed under: adjustable rate mortgage
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You need to be very careful with an adjustable rate mortgage. Not all of them have a set cap on how high the rate can go. Unless you can afford the higher rate now, you are better off with the fixed rate mortgage. For the majority of home-buyers today the fixed rate mortgage is best. Find a good loan officer in your area and ask what loan programs are available. There are lots of places you can go for advice. Here are a few good ones.
Without a doubt, a fixed rate mortgage We would not be in this crisis if adjustable rate mortgages were outlawed. When the rates jumped and the payments jumped, many Americans could not afford their house payment.
you could probably work with a mortgage company to find out the interest rate of each that you might be qualified for. One I had was lower when it began and changed after a period of time to whatever way the market went. Now I have a fixed mortgage. I like the fixed one better because I don’t have to wonder what it will change to or what company to try next. The best thing for you is probably what one is cheapest, then if it is the adjustable rate you can refinance if you maintain good credit.
ADJ rate is one of the main problems with the world now You think the rate is cheaper but in the long run it is more likely going to go up and the sky is the limit for the company to charge you it is better to realize what you can afford today and the same payment in 15 years 20 years or 30years. Just remember if it goes up above what you can afford you will lose it or you can hope the government will bell you out, good luck and make a smart decision go with your heart and not your dreams. Remember that the cap can change daily and more that ever will with the world in the near future with all the money bailing out everyone.
Adjustable rate mortgages are one of the main reasons there was a housing crisis. Enough said.
It is better a fixed rate mortgage, no doubts!!!
Always get a fixed rate. Adjustable rates are what caused all of the problems we are currently in. The rate and payment go up and the borrower is unable to pay.
A fixed rate mortgage would be the most secure mortgage loan as you a guaranteed the locked rate for the life of the loan. An ARM has several factors tied to its future interest rate.
First you need to know what index it is tied to. This will be the rate your loan will change to at the end of the fixed rate period. So, if our economy is still hurting in 3 years, say you have a 3/1 ARM, you could be looking at a significant jump in interest rates or you could see a significant drop. This is where your risk resides. No one can tell you what that rate will be, it would be merely speculation.
Second, you need to know what margin you are stuck with. This is usually 2.5-3.00%. This is the percentage that the mortgage company will charge in addition to the index rate that the loan is tied to. So, in 3 years we’re doing great and the treasury index, most commonly used index for ARMs, is at 4% you will be paying 6.5-7% interest at that time. If its bad and the index rate is 10% you’ll be paying 12.5-13.00%!!
In addition to the state percentages, each mortgage company has different fee schedules and programs that may increase your costs. Insurance expenses are often counted in your loan amount, so this additional cost also increases the amount you are paying interest on.
You also need to be aware of the life cap rate which is the highest overall % attainable over the life of the loan and the periodic cap rate which is the highest % attainable in a specific period, usually annual.
The cap is usually 5-7% over the initial rate. If you can handle that, get the adjustable..