Deciding whether or not to finance your home using an
adjustable versus a fixed rate mortgage is a very important
decision. Each of these options has both strengths and
weaknesses. However, the final decision comes down primarily to
ones%rsquo; level of personal and financial risk, as well as to a
simple matter of preference.
This short article will take a closer look at both types of
loans with the intention of helping you make an informed
decision.
A fixed rate mortgage is a good option for individuals who like
being able to know exactly how much they will be required to pay
on their mortgage each month. There are no surprises with a
fixed rate mortgage. It is also a great option if one plans to
stay in their home for the term of the loan or for at least
quite a while. They also work well for individuals on a fixed
income.
Fixed rate mortgages do have their disadvantages. For example,
fixed rate mortgages are not as flexible as adjustable rate
mortgages. If interest rates drop, one will not be able to take
advantage of these savings unless they refinance. Also, the
interest rates on fixed rate mortgages tend to be higher than
the starting rates of adjustable rate mortgages (ARMs).
Adjustable rate mortgages have lower initial rates, but then
rise after a set period of time. This means that ones%rsquo; payments
are lower initially but rise as interest rates grow. This may be
a good choice if one doesn%rsquo;t plan to stay in their house very
long, or is having difficulty paying their mortgage, due to a
short term circumstances, such as a layoff, a new baby, etc.
This option might give individuals a year or two to catch up
financially before they are required to pay the higher payments
that will follow the initial low rates of the adjustable rate
mortgage.
Fixed and adjustable rate mortgages are two very different
financing options. Fixed rate mortgages work well for those who
like to be able to predetermine their financial outlays as much
as possible. They are also a great choice for those who don%rsquo;t
necessarily like to take financial risks.
Adjustable rate mortgages work well when interest rates are
low, when one doesn%rsquo;t plan to stay his/her property for very
long, are unable to make initial large mortgage payments or are
simply looking to save money. When making a borrowing decision,
it is important to take proper inventory of ones%rsquo; level of
risk, financial plans and personal tolerance.
About The Author: For more information on getting better
Mortgage Rates and great money-saving Mortgage Company tips,
and resources, visit http://www.lenoxnationalmortgage.com
Please use the HTML version of this article at:
http://www.isnare.com/html.php?aid=3D104733