If you have an adjustable rate mortgage, recent interest rate hikes mean your payments will soon go up. Traditional 30 year fixed rate mortgages are averaging near 6 percent; you can still get a good deal before your monthly mortgage payments go up. If you’re not sure how long you will be in your current home, you can still take advantage of low interest rates without signing up for a 30 year deal.
You can do this by looking at hybrid Adjustable Rate Mortgages such as the 5/1 ARM. This Hybrid Adjustable Rate Mortgage loan offers a fixed interest rate for 5 years. After the five year period the interest rate will be adjusted every year. There are many other types of hybrid loans. These loans are all designated with the same format: fixed period/adjustment period. Popular flavors of hybrids mortgages include 5/1, 7/1, and 10/1 loans.
Keep in mind the interest rate you receive will depend on the length of the periods you choose. The higher these values, the higher your interest rate will be. Before signing up for one of these mortgage loans you need to understand any lender fees associated with the loan. By negotiating with your lender for things like no prepayment penalties you may be able to avoid these fees. Getting a loan without these lender fees will allow you to easily refinance or sell 5 years down the road without losing money.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
