by: Gary Gresham
Fixed rate or adjustable rate mortgages are two choices of mortgage loans that most lenders will offer you.
Your financial situation, how long you plan to live in the home, the current interest rates, and what risks you are willing to take is the best way to decide which loan makes the most sense for you.
Understanding the benefits as well as the risks of each loan will help when deciding if a fixed rate or adjustable rate loan works best for you.
Fixed Rate Home Loan
A fixed rate home loan offers you monthly principal and interest mortgage payments that never change for the life of your loan.
A Fixed rate home loan is the most stable option
with very little risk.
That is why it is the most popular way to finance a home today.
Fixed rate home loans are available as 30, 20, 15 and 10 year loans and they make sense if you answer yes to the following:
- Plan to live in your home more than 5 years
- Want the stability of a fixed monthly mortgage payment
- Don't want to risk future monthly mortgage payment increases
Some fixed rate home loans can be converted into biweekly mortgages which shorten the life of your loan. By paying your monthly mortgage payment every two weeks, you make one extra payment a year for a total of 26 payments.
You pay less interest on your loan and build equity faster.
It makes sense to finance a home with a fixed rate home loan only if you plan to live in your home for 5 years or longer.
That is because in the early amortization period of a fixed rate home loan, the biggest percentage of your monthly mortgage payment is applied toward interest.
Only a small amount is applied toward the principal but that will gradually reverse itself as the loan ages.
Adjustable Rate Loans
Adjustable rate loans make sense if you plan to live in your home less than five years.
Adjustable rate loans can also be easier to qualify for and that may make it easier for you to initially get into a home.
You can always refinance to a fixed rate home loan later if your future income is going to increase.
Adjustable rate loans start at a low introductory interest rate which is a lower than a fixed rate home loan.
The low introductory rate makes your monthly mortgage payment lower than a fixed rate home loan.
But the trade-off for lower payments of an adjustable rate loan is the uncertainty of the amount of your monthly mortgage payment. However, most adjustable rate loans have cap protections so your monthly mortgage payment doesn't go up too quickly.
Adjustable rate loans make sense if you answer yes to the following:
- Plan to move before 5 years
- Can afford a higher monthly mortgage payment if interest rates go up
- You believe that mortgage interest rates will remain the same or decline in the future
Everyone has different circumstances and only you can decide if the risks or advantages are right for you.
These tips should help with your decision if a fixed rate home loan or adjustable rate loan works best for you.
Copyright © 2005 - Credit-Repair-Facts.com - All Rights Reserved.
About The Author
Gary Gresham This article is supplied by http://www.credit-repair-facts.com where you will find credit information, debt elimination programs and informative articles that give you the knowledge to correct your own credit and credit report.
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Bad Credit Mortgage ? Sometimes Bad Credit History Can Be Rewarded?
Bad Credit Mortgage ? Sometimes Bad Credit History Can Be Rewarded?
by: Troy Francis
When you have bad credit you wonder what lenders will offer you for a mortgage deal on your home. The big obstacle, as you know, was your bad credit history. To add to the all the fears, there were a few pals of yours who held that the deals offered to you will not be as good as regular mortgages.
However, before you decide not to mortgage because of bad credit history, let me say,
mortgage lenders generally do not give much importance to bad credit history. Through this article, we will inform borrowers of bad credit mortgages which are basically mortgages for the people with bad credit history and the options for bad credit.
Ok! Why is it that mortgage loan providers ignore bad credit history while offering bad credit mortgage? Is it because they don?t fear for payment? Well, fact of the matter is that most borrowers with bad credit history do...
Bad Credit Mortgage ? Sometimes Bad Credit History Can Be Rewarded?
Mortgages > Bad Credit Mortgage ? Sometimes Bad Credit History Can Be Rewarded?
Applying for Your First Home Mortgage? What You Need to Know
Applying for Your First Home Mortgage? What You Need to Know
by: Jay Moncliff
Applying for your first home mortgage at first might seem like an easy process simply because people buy and sell homes every day. However, buying a home is not like buying a new bike, and applying for a home mortgage can be a long and drawn out process requiring a lot of patience and fortitude. However, if you know what to expect up front the home mortgage process will be much easier and a lot less stressful.
The following home mortgage tips will help you figure out how to best go about the home mortgage loan process for your situation.
Home Mortgage tip #1 Interest Rates
Before applying for your first home mortgage loan you will want to shop around and see what average home mortgage loan rates are. Shopping for home mortgage rates online is a timesaver and frequently have lower rates as well. Your home mortgage rate will affect how much money you have to...
Applying for Your First Home Mortgage? What You Need to Know
Mortgages > Applying for Your First Home Mortgage? What You Need to Know
The Principal Facts of an Interest-Only Mortgage
The Principal Facts of an Interest-Only Mortgage
by: Tanu Javeri
You are buying the house of your dreams with an interest-only mortgage. You'll get a low mortgage payment, and you'll maximize your tax deduction, all on your current income! Everything seems to be going good. But have you really understood the concept of interest-only mortgage and how it functions.
So What Is An Interest-Only Mortgage?
Well it may break your bubble but there is no such thing as an interest-only mortgage -
because eventually you'll have to pay the loan principal as well. In other words, with an interest-only mortgage loan, you pay only the interest on the mortgage in monthly payments for a fixed term. After the end of that term, usually five to seven years, you pay the balance in a lump sum, or start paying off the principal. Net Net! What you're really getting is an interest-only payment method which can be combined with any type of traditional...
Mortgages > The Principal Facts of an Interest-Only Mortgage
Home Loans and Mortgages ? Time to Consolidate Loans?
Home Loans and Mortgages ? Time to Consolidate Loans?
by: Charlie Essmeier
Home equity loans and lines of credit are useful tools for homeowners. They allow the homeowner to borrow against the value of his or her home for all kinds of purposes ? home improvement, debt consolidation, vacations, and more. The loans, backed by the value of the house itself, come with attractive interest rates and the added bonus of tax deductible interest. That interest, however, is often variable, adjusting up and down with changes in market conditions. At the moment, conditions are such that interest rates for adjustable rate loans are increasing while rates for fixed-rate loans are still fairly stable. This is probably a good time for homeowners with variable rate equity loans to consider consolidating their primary mortgage and home equity loan into a single entity.
The ideal candidate for such a consolidation would be a homeowner who has a variable rate home...
Home Loans and Mortgages ? Time to Consolidate Loans?
Mortgages > Home Loans and Mortgages ? Time to Consolidate Loans?