Why Should I Consider an Adjustable Rate Mortgage Rather Than a Fixed One?
Whether you’re looking for first-time financing or are considering the idea of seeking some sort of remortgage deal, do consider what an adjustable-rate mortgage could do for you. While there are benefits associated with fixed-rate financing, this approach could turn out to be just what you need. Here are some points to keep in mind before you make a decision.
You Begin With a Fixed Rate Period
Adjustable rate mortgages begin with a fixed term. That term can be anywhere from five to ten years, depending on the policies and procedures of the lender. During that time, you get to enjoy a competitive rate of interest that easily rivals and often exceeds what you could get with a fixed-rate mortgage.
During this period, it’s easy to project how much interest you’re paying. It also provides you with the chance to compare both approaches to financing. By the end of the period, you’ll know if you want to stick with what you have or consider refinancing.
There’s The Chance to Build More Equity During That Period
Remember the competitive rate that you get during that first term of the adjustable rate mortgage? It’s often competitive enough to allow you the chance to build more equity in the home. That’s a good thing, since there’s more equity that you can borrow against in the event of some financial crisis.
If you find yourself able to make additional payments while the adjustable rate is still in force, that further helps you to build equity and reduces the amount that will be subject to whatever rate fluctuations may apply during the rest of the mortgage’s life. See that as another way you stand to save money and still end up with a home that’s all yours.
You Have the Chance to See Which Direction Interest Rates are Heading
Another point in favor of an adjustable rate mortgage is that it buys you time to see in which direction interest rates will move in the future. For now, you get to make the most of the great rate that’s locked in for the first several years. Monitor the market and see how interest rates move during that time. You can see if they tend to move upward, remain fairly static, or decrease.
The trends that emerge while you enjoy the fixed rate make it all the easier to predict what will happen over the life of your mortgage. If what you see tends to indicate that rates will remain low, you may decide that keeping the adjustable rate mortgage is the best way to go. Should you believe that rates will jump by a significant margin, you can always refinance to the lower fixed rate that’s the norm right now and lock it in with relative ease.
You Could Stand to Save a Lot of Money Over the Years
Any way you look at it, opting for an adjustable rate mortgage does have the potential to save a lot of money over the fifteen to thirty year period that you finance the purchase of your home. It’s not just the initial fixed period that will save money. By watching market movements, you can take actions that help to maximize your savings. Through it all, those timely payments go a long way toward keeping your credit rating healthy.
Are you interested in looking closer at your options for mortgage financing or refinancing? Do you think that some sort of quick close mortgage with an adjustable or fixed rate would be right for you? Talk with a broker today. The solution may be easier to identify than you think.