Which is Best, Fixed or Adjustable Rate Mortgages
Buying a house is one of the biggest decisions that one can face financially today.
Unless you have a lot of money saved, you will need to obtain a mortgage.
This means that you will quite possibly be tied to your house for a long time to come or until you resell.
There are many things to consider when buying a house and obtaining a mortgage.
How is your credit rating? What type of mortgage do you want? How much money do you have to put down? Obviously, the better your credit rating, the better chances that you will have of getting a mortgage and getting a much lower interest rate.
Even if your credit is not so good, don't give up hope as there are mortgage lenders who are willing to lend to you, at a higher interest rate of course.
There are two main types of mortgages, the fixed rate and the adjustable rate.
The Fixed Rate Mortgage is as it says, the rateof interest is agreed upon for a term of years, usually 15 or 30 and it doesn't change.
This can work to your advantage in a couple of ways.
You know how much you are going to be paying for the life of the mortgage so you can budget more effectively without being surprised by an increase in your interest rate.
The other way is that although your mortgage interest rate may start off a little higher, you will find as the years go by, you are actually paying quicker into the equity of your home.
This can help if you want to borrow against the house to do renovations, take a vacation or put a child through college.
The Adjustable Rate Mortgage starts off at a lower rate of interest for a specified amount of time but then it can be increased by the lender.
It usually has a cap so although they can keep increasing it, they are limited by the cap.
This can turn out to be very financially draining and you only get a certain amount of warning so your mortgage payment can change from one month to the next.
The good thing about this mortgage is that if you are only intending to stay in the house for a few years you will have the cheaper interest rate for the specified amount of time.
Basically the type of mortgage that will suit you best either the Fixed or the Adjustable Rate will depend on the length of time that you think that you will be staying in the house.
If you only intend to stay for 1 to 5 years, you may want to consider the Adjustable if you can get a good rate that will not be adjusted for a number of years.
If you intend to stay longer than 5 years, you may want to go with the Fixed Rate Mortgage that will always stay the same although may be a fraction higher.
Unless you have a lot of money saved, you will need to obtain a mortgage.
This means that you will quite possibly be tied to your house for a long time to come or until you resell.
There are many things to consider when buying a house and obtaining a mortgage.
How is your credit rating? What type of mortgage do you want? How much money do you have to put down? Obviously, the better your credit rating, the better chances that you will have of getting a mortgage and getting a much lower interest rate.
Even if your credit is not so good, don't give up hope as there are mortgage lenders who are willing to lend to you, at a higher interest rate of course.
There are two main types of mortgages, the fixed rate and the adjustable rate.
The Fixed Rate Mortgage is as it says, the rateof interest is agreed upon for a term of years, usually 15 or 30 and it doesn't change.
This can work to your advantage in a couple of ways.
You know how much you are going to be paying for the life of the mortgage so you can budget more effectively without being surprised by an increase in your interest rate.
The other way is that although your mortgage interest rate may start off a little higher, you will find as the years go by, you are actually paying quicker into the equity of your home.
This can help if you want to borrow against the house to do renovations, take a vacation or put a child through college.
The Adjustable Rate Mortgage starts off at a lower rate of interest for a specified amount of time but then it can be increased by the lender.
It usually has a cap so although they can keep increasing it, they are limited by the cap.
This can turn out to be very financially draining and you only get a certain amount of warning so your mortgage payment can change from one month to the next.
The good thing about this mortgage is that if you are only intending to stay in the house for a few years you will have the cheaper interest rate for the specified amount of time.
Basically the type of mortgage that will suit you best either the Fixed or the Adjustable Rate will depend on the length of time that you think that you will be staying in the house.
If you only intend to stay for 1 to 5 years, you may want to consider the Adjustable if you can get a good rate that will not be adjusted for a number of years.
If you intend to stay longer than 5 years, you may want to go with the Fixed Rate Mortgage that will always stay the same although may be a fraction higher.
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