Many homeowners favor fixed rate mortgage loans because they need a monthly payment that will not change over the life of their loan. While it’s true that Adjustable Rate Mortgages are typically lower there is the risk of payment shock. Here are several tips to help you choose the right mortgage while minimizing your risk.
How to Choose The Right Mortgage Loan
The decision when choosing the type of mortgage for your home can be easily made based on the amount of time you will be staying in your home. When the economy is bad choosing a Fixed Rate Mortgage is a safe bet that can hedge you from economic uncertainty.
Mortgage rates are nearly impossible to predict and no one can say with any degree of certainty what they will be in several years. If you only plan on keeping your home for five to seven years you could benefit from the lower rates offered by Adjustable Rate Mortgage loans.
Here are some of the benefits of fixed mortgage loans versus adjustable rate mortgage loans.
Fixed Rate Mortgage Loans:
• Predictable mortgage payments
• Fixed interest rates are still at historically low levels
• Won’t have to refinance when rates go up
• Fixed Mortgage Rates are nearly at the same levels as Adjustable Rate Loans
Adjustable Rate Mortgage Loans:
• Mortgage Rates are just lower than fixed rate loans
• Hybrid loans have fixed rate periods lasting as long as seven years
• Some loans offer ultra-low introductory rates
• Ideal for homeowners only planning to stay for a short while
There are other reasons for choosing one type of loan over another but the safest bet is to base your decision on the amount of time you will be keeping your home. If you are only going to be with your home for the short term, you cans save yourself some money by choosing an Adjustable Rate Mortgage loan.
You can learn more about your options when refinancing, including costly mistakes to avoid by registering for the free refinancing videos on this website.