Mortgages > Adjustable vs Fixed Rate Mortgages

Adjustable vs Fixed Rate Mortgages

by: Max Hunter

Mortgage rates can either be fixed for the duration of your loan or can be adjustable. An adjustable rate mortgage is a loan that is set up with an interest rate that changes based on pre-determined criteria, primarily tied to the federal interest rate. If the interest rates are up, then your interest rate on your loan will be higher, if the interest rates are low than the interest rate on your loan will go down.

Adjustable rate mortgages (ARM) are generally fixed interest rates for a period of time and then become adjustable. Generally speaking the introductory interest rate for an ARM loan will be lower than a fixed rate mortgage. This is done in order to lower initial payments and allow people to take out larger mortgages, or give them smaller payments for the introductory period. This is attractive to people who may know that their income will be increasing over that period of time.

Whether or not to choose an ARM or a fixed rate mortgage has been debated for as long as there have been ARMs. Though people feel strongly in both camps, simple mathematics can assist you in determining which mortgage is best for you and your personality. Your personality? Yes. Some people are not comfortable with any uncertainty in their lives. The idea of having an uncertain mortgage payment in the future may cause them more stress than the money they are saving is worth. Therefore, factor your own comfort level into the equation.

Generally speaking, ARMs are 2, 3 or 5 years, though they can be longer or shorter. At the end of that period your interest rate will become variable unless you sell your home or refinance. If you think that the likelihood of your selling or refinancing within the period of the ARM is strong, than the lower interest rates of the ARM loan will be of great benefit to you. If you think it is unlikely that you will sell or refinance within that period, then you may not benefit from an ARM.

Bob and Robyn are a young married couple just starting out. Bob is in advertising sales and Robyn is a teacher. Bob is fairly confident that his income will continue to increase over the next several years as he works his way up to becoming an account executive. Robyn's income is more predictable and is on an upward trend. Being a young couple they do not have the finances for large mortgage payments.

Bob and Robyn are presented with two mortgage proposals for their $150,000 mortgage. Proposal one is a 30-year fixed rate mortgage at 6% and the other is a 5-year ARM at an introductory rate of 5.25%. The fixed rate mortgage payments would be $899.33 per month, not including taxes. The ARM would have a 5-year period where payments would be $828.31 per month, not including taxes. Bob knows that even if he can afford the extra $70.00 per month for the fixed rate mortgage, that $70 per month may be better spent knocking down principle during the ARM period. He is further confident that as his salary increases, he is likely to upgrade his home within five years or refinance to make home improvements. Bob and Robyn took the ARM loan.

John and Catrina are a married couple with three grown children. John has been employed at the same company for 18 years and Catrina has been with her company for 12 years. They have consistent and stable income. Neither John nor Catrina expect any substantial increases in their salaries. After their last child moved out of the home they decided to downsize and buy a smaller home. They have a substantial down payment and will only be taking a mortgage of $100,000 on their new home. John and Catrina are presented with the same loan options as Bob and Robyn were. John and Catrina, however, know that it is unlikely they will sell or refinance in the next five years. They are comfortable with the payment schedule and, therefore, prefer the certainty of the fixed rate mortgage.

There are countless websites that offer mortgage calculators to determine your mortgage payment. For your convenience we offer one on our site (if you are not going to have one on your site, we can remove this, though I think it'd be good to have one on your site). You can review the different payment schedules based on the interest rates quoted for the fixed-rate and the ARM. Once you know the different payment amounts you will be able to determine which loan makes the most sense for you and your unique circumstances.

Your mortgage professional should also be able to assist you in reviewing the options and making the best decision for you. The more open and honest you are with your mortgage professional the more helpful they will be. It is only if they are armed with full and honest information that they will be able to make recommendations to you.

About The Author

Max Hunter is the author of many credit related articles. If you are looking for help with Home Loans or any other type of credit issue please visit us at http://www.creditcardunlimited.com.

Sub-Prime Mortgage Loans - Five Ways To Lower Your Rates On A Sub-Prime Mortgage

Sub-Prime Mortgage Loans - Five Ways To Lower Your Rates On A Sub-Prime Mortgage

by: Carrie Reeder

Sub-prime mortgages don?t mean you have to pay excessively high interest rates to buy a home. By taking time to do some research and pick the right terms, you can save thousands on your mortgage. The following five tips will help you get low rates with the right subprime lender.

Compare Lenders

The number one way to lower your interest rates on your sub-prime mortgage is to compare lenders before you apply. It sounds so simple, but too many homebuyers skip this step, costing them thousands.

Plan on taking at least a day to explore your options. The easiest way to look at financing packages is to request quotes online. While you are requesting quotes, take a look at conventional lenders as well. They often offer good rates and terms for those with adverse credit histories.

Pick An ARM

Adjustable rate mortgages (ARM) offer...

Sub-Prime Mortgage Loans - Five Ways To Lower Your Rates On A Sub-Prime Mortgage

Mortgages > Sub-Prime Mortgage Loans - Five Ways To Lower Your Rates On A Sub-Prime Mortgage

Home Loans and Mortgages ? Watch Out for Dangerous Subprime Loans

by: Charlie Essmeier

With the growing interest in real estate purchasing and speculation, more and more lenders are offering ?nontraditional? types of mortgages. These include adjustable rate mortgages (ARM) of every shape and size, the more popular interest-only mortgage, and the very dangerous Option ARM mortgage, which can cause the amount you owe to actually increase as time passes. One rapidly growing sector of the lending market is the so-called ?subprime? market, which caters to consumers with poor credit records. The subprime market is a profitable one, as lenders offer loans to consumers whose poor payment history targets them as risky clients. Yes, they are risky clients, but the lenders charge fees and interest rates that are high enough to offset the additional risk. People who are interested in purchasing a home should be careful, however, as many people who should qualify...

Home Loans and Mortgages ? Watch Out for Dangerous Subprime Loans

Mortgages > Home Loans and Mortgages ? Watch Out for Dangerous Subprime Loans

ARM ? Adjustable Rate Mortgages

by: Dan Lewis

Traditionally, homebuyers could look to two forms of mortgages ? fixed rate and adjustable mortgages. While there are now many more options, this article takes a look at the adjustable rate mortgage.

What is an ARM Loan?

An adjustable rate mortgage [?ARM?] is a basic mortgage with one important exception. With an ARM, your interest rate will start low but typically move up throughout the link of the loan. The timing of the movements is dictated by the terms of the loan. The rate may be adjusted every month, but more typical periods are every six or twelve months. Most adjustable rate mortgages also have a cap on the amount the interest rate can be raised in a particular period.

?ARM? Yourself?

A homebuyer has to be very careful when selecting an adjustable rate mortgage. Buying a home necessarily involves budgeting out how much of a monthly mortgage rate you can afford to pay. With...

ARM ? Adjustable Rate Mortgages

Mortgages > ARM ? Adjustable Rate Mortgages

UK Loans: Borrowing The Right Kind Of Money

UK Loans: Borrowing The Right Kind Of Money

by: Amanda Thompson

Most people don?t think of loans until the need originates in their own lives.

Borrowing money is neither an easy decision nor a decision which has no serious repercussions. Taking loans will have an impact on almost all other decision and your future financial plans. With UK personal debt growing by ?1 million every four minute it is likely that loan borrowing is becoming more famous than ever.

It is common that people over spend leaving financial gap which loans can fill. Average consumer in UK is borrowing via every possible way but loans still remain the most popular way and economical way of borrowing money. Loans are available for every purpose in UK.

One of the several loan types available in UK is bound to suit your purpose. The most basic loan type in UK is personal loans which are provided by financial institutions or banks with or without collateral....

UK Loans: Borrowing The Right Kind Of Money

Mortgages > UK Loans: Borrowing The Right Kind Of Money