Fixed Rate Mortgages Vs Arm Loans – Which One Is Better?

In a general sense, there is nothing wrong with an adjustable rate mortgage. But if you have heard cautionary tales, there is good reason. To add, this probably isn’t the best time to be looking at getting an ARM mortgage loan. I will discuss why and talk more about the differences between a fixed rate loan and an adjustable rate loan.

the_difference_between_a_fixed_rate_loan_vs__an_adjustable_rate_loanBack in 2006, I took out an ARM loan on the first home I purchased. The idea behind an ARM loan is that you can get a better introductory rate, and then as time goes by, the rate can fluctuate up and down. It is kind of a gamble, and truth be told, I didn’t get the best introductory rate because of my credit.

In the current market, you might have noticed that rates have been on the rise, consistently. In fact, I believe the FED has hiked interest rates three times in one year. That’s not good, but interest rates have been at historical lows for quite some time.

That being said, it makes more sense at the moment to lock in the best rate. Securing a low fixed rate mortgage is the best idea. If you were to do that, then you would be able to enjoy that rate, knowing that it would never go up on you.

There is something to be said about fixed rate mortgages under all circumstances. It’s nice having a conventional mortgage, and that is what I have with my condo. The rate is 5 percent, and I have just shy of 7 years left to pay on the mortgage.

Are you still interested in looking at ARM loans? I wouldn’t if I were you, but to each his own. You will have to make the decision about the type of home mortgage you want to get. If you get an adjustable rate mortgage, you just want to be sure that you are comfortable with the loan.

Have you already submitted a mortgage loan application or spoken to a mortgage broker? If so, it’s time to get down to the details. What interest rate are you going to be offered based on your credit? Remember that while the FED has been raising interest rates, they are still low. And when it comes to fixed rate mortgages, you have the choice of a 15 or 30 year loan. Which one is going to suit you best as you get ready to buy a home?

What is a Home Loan

What is a Home Loan?

Owning a home can be one of the best things ever, and it is a good idea to know more about ways of owning a home and the best option for you. Lending institutions have provided an easy for people to own homes without having the cash to pay for it. One of the most common options people go with is taking a home loan. With a home loan, you will have a chance to own a home and pay for it over a period of time.

A home loan is a loan that financial institutions give and get the security over the property you are buying using the loan. The loan will be 25 to 30 years, and you need to make regular payments every month or fortnight. The loan will be paid over the contracted term. The security of the loan is the property, and this means the lender can sell the property to settle the debt if you are not able to pay the loan. Many people in the country are able to own homes through loans because of the high property prices.

There are different types of home loans. They can be classified by purpose, or the type of interest rate. The two main types of home loans using interest type are fixed rate home loans and variable rate home loans, but there are many other types.

The variable rate home loan means that the interest rate will fall and rise over the term of the loan. This can be as a result of the change in official cash rate or decision by the lender. This type of home loan will offer flexibility. You must meet the monthly requirement, but you have the chance to pay more if you want to. You will not be charged with a break fee because there is no fixed term for the break, and this means having the freedom to sell the house without paying extra fees and charges, which usually applies to fixed rate home loans. The downside is the fact that the rate can rise anytime, and can be bad if you are on a tight budget.

Fixed rate home loan is where the interest rate is fixed for a given amount of time, with 1,2,3,4 or 5 years being the most common. This type of loan comes with certainty because you know the repayments you are going to make. If you decide to sell before the end of the fixed term, you end up being charges a “break fee”.