As you are preparing to buy a home or refinance your current mortgage you will get bombarded with loan offers from lenders across the country. A simple search online can leave you scratching your head and wondering what should I do.
Before we get started, let’s face it the best mortgage you can get is none at all. If you can pay cash or payoff your current home, then you should do so. Now this may not be an option for many, it should be everyone’s financial goal.
That being said, there are two mortgages we will look at here; fixed rate and adjustable rate mortgages. In addition we will look at which mortgage may be the best one for you.
Fixed rate mortgages have been around for a long time and by far are the most popular among financial gurus. These mortgages have set interest rates and payments and are perfect for those who are planning to stay in the home for a long time.
Adjustable rate mortgages do just what they say they do. The interest rate changes up or down after set time intervals. The loan documents should be carefully read, Be sure that you understand the rate adjustments, caps, and adjustment intervals.
Another type of adjustable rate mortgage is the interest-only mortgage. Like an adjustable rate mortgage, an interest-only mortgage experiences changes in interest rates after set intervals. Where they differ is that in this mortgage, your payments only pay interest charges. None of your payment goes towards your mortgage balance.
While adjustable rate mortgages have a place in the marketplace, as a rule of thumb most financial experts do not consider them a logical choice for most families. These mortgages may be a safe option for short-term homeowners who only plan to own the home for five years or less. A mortgage comparison calculator can show you side by side comparisons of mortgage offers.
Final Remarks
If you do plan on staying in your home for a long period of time and currently have an adjustable rate mortgage it may be a good idea to refinance into a fixed rate mortgage. A mortgage refinance calculator can help you as you compare refinance offers.
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