What are some of the reasons people choose an adjustable rate mortgage over a mortgage with fixed rates? This was one of the many questions I asked myself when I was trying to buy a second home. It's not always clear what option would be best for the homeowner when it comes to such a large purchase. The smart buyer will want to look into the future and try and predict how their income and life is headed. This is not usually an easy prediction to make because we all know that life is inherently unpredictable. But for some an Adjustable Rate Mortgage Loan is the best option and here's why.
Take advantage of the market
Interest rates right now are among the lowest they have ever been in history. A typical ARM has a fixed rate period that lasts 3, 5 or 7 years. The rates are often much lower than the more popular 30 year fixed rate mortgages. In fact the market rate for adjustable rate mortgages is lower than 30 year FHA mortgages.
Pay less in the long run
It's also possible you can pay less over time even including closing costs on a refinance. You will be paying less money overall during the fixed rate period than a traditional mortgage. Say you buy a home for $200,000 with a 30 year fixed rate mortgage at 5.25%. Monthly payments would be about 1,100. With a 5 year ARM at 3.99% your monthly payments would be about 950 for the first five years. This adds up to a five year savings of just of $9,000. Including closing costs, you still will be paying $7,000 less during the fixed rate period!
ARM's can be fiscally responsible decisions
ARMs are popular among people who manage their money well. This is because you can save so much during the initial fixed rate period. Some countries only have adjustable rate mortgages available. The idea is that the home owner can pay more towards the principal of the loan early on without any penalty. The early reduced payments lower the total cost of the loan and potentially allow you to pay it off in less time.
Just remember that they are not for everyone. Speak with an expert on the matter and see if an FHA adjustable rate mortgage out there might work for you. If after reading all this you are still wondering exactly what is an adjustable rate mortgage visit www.Real-Estate-Yogi.com or call an agent directly at 1-800-987-1397 for a free consultation
- You get the lowest possible mortgage rates. Right now interest rates are already very low, but you can get them even lower by choosing an ARM loan.
- ARM loans do not always adjust up! This is a common misunderstanding. Because the market is so fickle an ARM loan can actually result in a lot of savings which can be used towards the principal of your home, or to pay off other debt.
- ARM's are popular amongst the financially savvy because you can save so much money during the fixed rate period.
- ARM's are great for people who don't plan on staying in that particular mortgage for the length of the deal. Either they will move before the adjustments kick in, or they plan on refinancing down the line.
Interest rates right now are among the lowest they have ever been in history. A typical ARM has a fixed rate period that lasts 3, 5 or 7 years. The rates are often much lower than the more popular 30 year fixed rate mortgages. In fact the market rate for adjustable rate mortgages is lower than 30 year FHA mortgages.
Pay less in the long run
It's also possible you can pay less over time even including closing costs on a refinance. You will be paying less money overall during the fixed rate period than a traditional mortgage. Say you buy a home for $200,000 with a 30 year fixed rate mortgage at 5.25%. Monthly payments would be about 1,100. With a 5 year ARM at 3.99% your monthly payments would be about 950 for the first five years. This adds up to a five year savings of just of $9,000. Including closing costs, you still will be paying $7,000 less during the fixed rate period!
ARM's can be fiscally responsible decisions
ARMs are popular among people who manage their money well. This is because you can save so much during the initial fixed rate period. Some countries only have adjustable rate mortgages available. The idea is that the home owner can pay more towards the principal of the loan early on without any penalty. The early reduced payments lower the total cost of the loan and potentially allow you to pay it off in less time.
Just remember that they are not for everyone. Speak with an expert on the matter and see if an FHA adjustable rate mortgage out there might work for you. If after reading all this you are still wondering exactly what is an adjustable rate mortgage visit www.Real-Estate-Yogi.com or call an agent directly at 1-800-987-1397 for a free consultation
