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Borrowers have many more mortgage choices today than were available when I started my mortgage career in 1989. In addition to traditional fully documented fixed rate mortgages, borrower now have numerous adjustable rate mortgage options (including stated income, true no doc, and no ratio home loans).
While a fixed rate mortgage has identical payments and interest rates over the life of the loan, a variable or adjustable rate mortgage (ARM) can have a payment that varies monthly, semi-annually, yearly or after a few years.
You should chose either an adjustable rate mortgage or a fixed rate mortgage based on how long you expect to hold on to the mortgage. If you expect to keep the mortgage for seven years or longer, you should obtain a fixed rate mortgage. If, on the other hand, you expect to sell your home or refinance in a few years you should obtain an ARM because ARM payments are generally lower than FRM paymennts during the early years.
In a rising interest rate market, most people would be better off with a fixed rate home loan, than an ARM; conversly, in a market characterized by declining or stable interest rates, an ARM is the sensible option.
Borrowers with temporary bad credit or other financial problems should get a short term ARM that will give them lower payments and breathing room to fix their financial and/or credit problems. Under these circumstances, an ARM should be viewed as a band-aid loan; not a long-term solution. As interest rates increase over time, a borrower's ultimate goal should be refinancing the adjustable rate mortgage into a fixed rate mortgage.
Depending on how long you expect to keep your mortgage, your ARM choices will vary. Please call me to discuss your fixed and variable rate options including 30-year fixed, 15-year fixed, pay option ARM/cash flow ARM, 6-month ARM, and several intermediate term ARMs such as 2/28, 3/37, 5/25, 3/1, 5/1, 7/1, 10/1, etc.
For certain borrowing needs (debt consolidation, home remodeling, etc.), a home equity line of credit (HELOC) or second mortgage may make more sense than a new first mortgage. Please call to discuss.
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