Fixed Versus Adjustable Mortgage Rates

Buying a home is one of the biggest decisions most people make in their lifetime. It is a huge investment and for many the idea of committing to a mortgage (one that could last up to 30 years to pay off) is a stressful experience. When buying a first home there are many factors to consider. What type of house do you want? How much can you afford? Will you be able to build equity in the current housing market? However, one of the biggest challenges for many new home buyers is understanding the various mortgage options and how the constantly fluctuating interest rates can affect them. Here’s how to understand the difference between fixed rate mortgages and adjustable rate mortgages.

Fixed Rate Mortgages
Fixed rate mortgages offer the buyer a consistent rate for the period assigned to the mortgage. For example, if you lock in at a 30 year mortgage your rate will not increase for the life of your loan. The benefit of this type of mortgage is that it makes it easier for the borrower to budget monthly expenses because payments remain the same every month. These types of mortgages are easy to understand for the new home buyer and are good for borrowers who are at the upper end of their budget and can’t afford any surprises. Fixed rate mortgages are also good for home buyers that plan to stay in their home for the duration of their mortgage. However, fixed rate mortgages don’t protect buyers if home values drop. In this scenario payments can become overvalued as equity falls behind.

Adjustable Rate (ARM) Mortgages
In comparison, monthly payments of adjustable rate mortgages go up and down each time the rate resets. Adjustable rate mortgages reflect short-term rates and are usually lower than the longer term mortgages. ARMs allow home buyers to purchase a larger more expensive home because interest rates are lower. The lower monthly payments are good for borrowers who want to take advantage of lower rates but have room in their budget if rates increase. However, many ARM loans begin with teaser rates that are below the indexed rate and in the long term may increase as rates reset to a market rate.

Let’s look at an example. Monthly payments on a $400,000 loan for a 30 year fixed rate mortgage at 4.31 percent would be $1981.84 compared to a 1 year adjustable rate mortgage at 3.00 percent, which would be $1686.00 resulting in a savings of approximately $300 per month.

Most first time home buyers rush into the housing market when rates are low without really understanding what they are getting into. Mortgage rates are important but borrowers have to consider the overall cost of home ownership including things such as the amortizaton period, payment options, and how the different types of mortgages can effect payments over time.

Often many people think that taking on a longer mortgage keeps repayments low. However, there is significantly less total interest repayable on a 15 year term than a 30 year mortgage.

Buying a first home can be exciting but it is also very scary. Especially for first time buyers who don’t have a clear understanding of interest rates and various mortgage products. Although there is a lot of stress that comes with purchasing a first home, it is a great investment and one that you will rarely regret as long as you ensure you know what you are getting into.

How To Find The Best Mortgage Rates? Some Must Know Tips

Well, if you are planning to buy a house with the help of mortgage loans, then you should always try to select the perfect mortgage plan which is well enhanced with a low mortgage rate. Well, I would like to tell you that the mortgage rates have increased from the last few months. It is quite difficult to look out for the perfect mortgage plan which is well enhanced with a low mortgage rate. Well, if you are looking out for the best possible mortgage cost, then you should consider some of the major aspects.

Acquiring the mortgage plan with wrong rates could really prove out to be your worst mistake. You should always try to select a perfect mortgage plan that can simply prove out to be very much beneficial to you. You should always consider your financial situation before selecting the perfect mortgage plan for yourself. It is also a fact that there is no magic formula required for selecting the perfect mortgage plan. Well, if you are not aware, then I would like to bring this to your notice that mortgage loans are of mainly two types. They are fixed rate mortgages and adjustable rate mortgages.

1. Fixed Rate Mortgages

Fixed rate mortgage plans are gaining a lot of popularity in the market. Most of the home owners try to select the fixed rate mortgages so that they can easily improve their financial condition. In fixed rate mortgages, the monthly payments and the mortgage amount remains the same throughout the loan period. It is really the best method because you remain familiar with the amount that you have to pay. Fixed rate mortgages are mainly meant for 15, 20 or 40 years.

2. Adjustable Mortgage Rates

Well, I would like to tell you that in case of adjustable mortgage cost, you may have to select a perfect adjustable mortgage rate loan according to your financial condition. The mortgage rates keep on changing according to the financial condition of the investment market. It simply means that you can also enjoy the lower mortgage amount.

Well, I would like to tell you that adjustable mortgage cost are very much convenient in the long run. If you want to acquire the mortgage rate for a short time period, then you can simply select the fixed rate mortgages. This is also the best method through which you can protect yourself from paying extra money. So, if you want to acquire low mortgage amount, then you should read this article of mine. Below mentioned are some of the major tips through which you can acquire the low rate mortgage for your self.

1. Comparison between Various Lenders

If you want to acquire the best mortgage rate for yourself, then you should compare the rates of various lenders. You can also shop for your mortgage because this can simply help you in acquiring the perfect deal for your mortgage plan. If you want, you can also obtain the quotes of various mortgage lenders. You can easily compare the quotes of various lenders and then you can simply select the perfect plan that can match with your financial needs and requirements.

2. Keep Your Credit Great

Well, if you want to acquire the best mortgage cost for yourself, then you can simply keep your credit looking great. It is really the best method through which you can acquire the best rate for your mortgage plans. If you are well enhanced with a good credit score, then you will face no problem in acquiring the good rates for your mortgages.

3. Investigate About the Hidden Fees

You should always investigate about the hidden fees of the lender because most of the mortgage lenders discover hidden fees which the borrower has to pay. So, before you select a perfect mortgage plan for yourself, you should always try to investigate about the hidden fees. You can also enquire about the hidden terms and conditions.

4. Always Try Negotiating

Negotiating is really the best way through which you can acquire best results for yourself. You can simply obtain positive results related to your mortgage plans with the help of negotiating. You can simply negotiate with the lenders.

So, these are some of the efficient ways through which you can acquire the best mortgage rate for yourself.

Factors That Affect Your Mortgage Rate

There are going to be many factors which affect your mortgage rate, some of which are under your control and others which you can do nothing about. You should be aware of all of the factors which might affect your mortgage rate and take them into consideration before applying for a mortgage loan. You can take steps to improve some of the factors which affect your mortgage rate and make decisions about when is best to apply based on basic knowledge about your mortgage.

What is a mortgage?

Most people understand the basic definition that the mortgage is a loan which is used to purchase a home. There is slightly more to the mortgage than this. The mortgage is a loan which uses the property itself as collateral. If you fail to make the payments on your mortgage, the property may be taken over by the lending institution who has given you the mortgage.

You want the best mortgage rates

The mortgage is a long-life loan meaning that it is not going to be fully repaid for many, many years. A standard home mortgage is often a fifteen or twenty year loan. This means that you want the best mortgage rate possible because you are going to be needing to pay this rate for a long, long time.

Factors affecting mortgage rates

Major factors affecting mortgage rates include:

o Amount of down payment on mortgage
o Consideration of closing costs
o Income of mortgage borrower
o Life of mortgage loan
o Life of mortgage rate
o Total mortgage loan amount
o Whether or not the mortgage rate is adjustable

Factors making up a desirable mortgage rate

The basic premise of the desirable mortgage rate is that it is within your budget, has a low interest rate and is paid back as quickly as possible. How all of this plays out in terms of each individual mortgage depends upon the independent factors of each borrower. For example, you might prefer a fifteen-year mortgage loan to one that is paid over thirty years. This will allow you to save money over time because you pay less in interest. However, if you can not afford the higher monthly payments and you default on the mortgage loan, you have not helped yourself out any.

Negotiating a desirable mortgage rate

The simplest method of achieving a desirable mortgage rate is to work with a mortgage broker. You will have to pay up front fees to the mortgage broker, usually at the time when all of the closing costs are paid on the home purchase, but you will save money and time in the long run. The mortgage broker plays the role of assessing your personal financial situation and working with lending institutions to negotiate the best possible mortgage rate for your situation. The mortgage broker has experience with all of the factors and terms used in the mortgage loan negotiation and can use this expertise to your benefit.

Repayment of the mortgage loan

When you are working out a plan of repayment for the mortgage loan, you should look at the amount of money available for down payment, the amount you can reasonably pay on the loan each month, the grace period of any adjustable mortgage loan interest rates and any fees owed for early repayment of the mortgage. Working with the mortgage broker, you should be able to develop a repayment plan for your mortgage which allows you to purchase and remain in your home through the life of the loan.