Title:
Adjustable Rate
Mortgages vs. Fixed Rate Mortgages
Word Count:
508
Summary:
Buying a home can
be an exciting and stressful time for anyone. While you may be excited at the
prospect of owning your own home, especially if it is your first home purchase,
the idea of choosing between all of the many different types of mortgages may
leave you feeling confused and apprehensive.
Keywords:
loans, mortgage,
fixed, adjustable, secured, home, house, interest, debt, repayment,,apr, loan
Article Body:
Buying a home can
be an exciting and stressful time for anyone. While you may be excited at the
prospect of owning your own home, especially if it is your first home purchase,
the idea of choosing between all of the many different types of mortgages may
leave you feeling confused and apprehensive.
Two of the most common choices you’ll find in the mortgage market are
adjustable rate mortgages and fixed rate mortgages. Fixed rate mortgages are
the most traditional type of home mortgage, offering a fixed interest rate that
does not change throughout the life of your loan. There are a number of
important advantages associated with this type of mortgage. First, if you are
budget conscious, this type of mortgage will give you the peace of mind in knowing
that your monthly mortgage amount will not change. You can budget the remainder
of your financial obligations without worrying about a changing mortgage
payment to throw things off.
An adjustable rate mortgage works differently. With this type of mortgage you
may be able to obtain a lower interest rate than would normally be available
with a fixed rate mortgage; however, the interest rate is not fixed. This means
that your monthly mortgage rate may change as interest rates change. With such
a mortgage you may not be able to regularly plan your budget due to such
fluctuations. While there is usually a cap that will keep the interest rate
from fluctuating too much, even a little fluctuation can be too much for some
homeowners. Of course, there is also the possibility that interest rates will
drop and if that is the case, because your mortgage is adjustable, your monthly
payments will drop right along with the interest rate.
When deciding whether a fixed rate or adjustable rate mortgage is your best
choice, you need to give thought to several factors. Ask yourself whether it is
more important to be able to plan your monthly budget without wondering whether
your mortgage will fluctuate or whether you would prefer to receive a lower
interest rate in the beginning of your mortgage.
Remember that if you decide you would like to obtain the advantages of both you
do have other options available to you. For example, if you feel the interest
rate offered to you on a fixed rate mortgage is too high but you want the
security of not having to worry about a fluctuating interest rate you can
always buy down your interest rate by purchasing points. This will mean more up
front costs for your mortgage; however, it may be worth it to decrease the
interest rate, especially if interest rates are currently high.
If you do elect to go with an adjustable rate mortgage make sure you understand
exactly how high the rates may go as well as ensure you have enough ‘wiggle’
room in your monthly budget to cushion increases if they occur. This may help
to keep you out of a tight spot and possibly losing your home due to rising
interest rates.