Today we will be discussing mortgage plans, namely adjustable rate mortgages along with FHA mortgage refinancing options. Many people in America only associate an ARM with a calculated risk. The risk being that at some point the home owner’s mortgage rates will adjust to payments well beyond their means and they will have to default on the loan.
Although this can happen, there are many options available to prevent something like this from ever happening.
From certain caps that are in place to the possible ability to refinance up to 95% of your primary home’s value there are many ways to make an adjustable rate mortgage work financially. Still, most Americans will almost always choose to pursue a fixed rate mortgage because it is more stable, but they are missing out on some of the great advantages an ARM can provide.
- Contrary to popular belief adjustable rate mortgage rates don’t suddenly spin out of control. Lenders and homeowners negotiate certain caps which prevent the percentage from exceeding a certain amount despite the housing market.
- Interest rates are typically lower than fixed rate mortgages. During the fixed rate period of an ARM you will enjoy significantly lower monthly payments during which you can save a lot of money.
- Not only can you refinance up to 95% of your homes principal value, but you can also buy your primary residences for as little as 5% down.
- FHA adjustable rate mortgages have more flexible guidelines as well as a government backed loan, and for veterans the VA ARMs are offered as alternatives to fixed rates.
Why Are People Choosing Fixed Rates?
The reality of the market today is that homeowners are refinancing every few years, or moving every 5-7 years. So why are people choosing 30-year fixed rate mortgages? They are actually paying more on their fixed rate payments for the sake of long term interest rate protection that they won’t ever utilize. On the flip side, many financially savvy people are wise to this and know how to use adjustable rate mortgages to save money. It is also possible to eventually seek FHA mortgage refinancing options before the rates change. However there are appropriate times to apply for one and they are still more of a risk if you don’t have a financial plan involved to prepare for adjustments or a possible refinance at some point before adjustments are made.
Ideal Candidates
An ARM is ideal for people who consider their home a starter kit and/or plan to move before the rates are adjusted. People also have to be disciplined with their financial plans and use their savings during the fixed rate period to accomplish their goals. Some people have jobs which require them to move on a regular basis and can enjoy the lower monthly payments because they have no use for a long term plan. The other possibility is to use the initial fixed rate period to pay off the principal quickly by paying more than the minimum.
To learn more about mortgage plans available to you in your part of the country visit www.real-estate-yogi.com or call them directly at 1-800-987-1397 for a free consultation.
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