When you are going to buy a home and seek a mortgage, you will have many options and ways to finance the home. You must think carefully and look at various terms, percentages, and payment plans. You can also choose between a fixed-rate mortgage (FRM) or an adjustable-rate mortgage (ARM). Each type of loan comes with its pluses and minuses. Professional Mortgage Solutions in Rego Park, NY is here help you weigh the pros and cons.
A fixed-rate mortgage (FRM) comes with an interest rate that will not change during the loan. Obviously, this is a great option if you are worried about the economy and fluctuating interest rates. Conversely, if the market improves and interest rates fall, it will be much harder for you to change the terms of your loan to take advantage. Every time you refinance the mortgage, you may pay in time, headaches, and closing fees.
With all this in mind, what is one to do? Well, if you are planning to own and live in the home for a while, the fixed-rate option may be ideal. Rates will fluctuate more the longer you stay. With an FRM, you will have a predictable monthly home payment will cost. It may have more interest for you in the end, but at least you can be prepared.
Adjustable-rate mortgages (ARMs) are the opposite of FRMs. Your interest rate can change over time in the loan, subject to its terms and conditions. For instance, the loan may have caps on how much the rates can fluctuate and when they can be changed. Choosing an ARM may give you more flexibility, but it also makes you more susceptible to changes in the economy.
If you plan to purchase a home and seek out lower, up-front monthly payments, then an ARM may be the choice for you. As you pay off the home over time and build equity, you can look to gain more beneficial loan terms. You may also save more money during the periods when the interest rates are low, so that you are more prepared to handle future rate changes. Be mindful that it may be hard to change the terms of an ARM that fluctuates dramatically. Do not be overly influenced by the appeal of an up-front lower cost when making your decision.
Choosing Your Financing Options
Some people choose to get two home mortgages, one with an FRM and one with an ARM. In this way, you break up your risk. However, this may result in additional fees, paperwork, and monthly payments to process. When making up your mind, start by looking at your finances and making goals for yourself. This will help guide you to a better option.
Professional Mortgage Solutions in Rego Park, NY is here to help answer any questions you have about fixed versus adjustable rate mortgages. Contact our friendly staff today!