In the market to purchase a home? If so, then you will soon find yourself facing the tough task of choosing a home mortgage loan product. This is not such a simple thing to do, because of the myriad options available to you. For example, one very basic starting point is to determine whether you want to qualify for a fixed or variable (adjustable) rate loan. Here is what you need to know about both:
What determines interest rates? All mortgage loan interest rates, whether fixed or variable, are based on whatever the prevailing market interest rate is at the time of the rate lock. It is important to understand this, because the decision of whether to choose a fixed or adjustable interest rate depends heavily on which direction the market is headed in.
Fixed rate. Just as the name implies, a fixed rate mortgage is a program that secures a single interest rate for you, which will remain in place over the lifetime of the loan. If you are getting into a loan when it is apparent that interest rates are expected to rise in the not-so far off future, then it is a good idea to lock in the lower rate and stick with it.
Adjustable rate. As you might’ve guessed, an adjustable rate mortgage varies your interest rate each period (as specified by the terms of your particular loan program), in accordance with changes in the going market interest rate. Of course, this can have either a positive or negative effect on your monthly payments. If you are getting into your mortgage when rates are high and expected to fall, then it might be a good idea to commit to a variable rate mortgage.
What the statistics say. While there is no definitive right or wrong answer for everyone, there is something to be learned from looking at a comparative history of mortgage loan payments. Statistically speaking, people who lock in to adjustable rate mortgage loan programs end up paying less in interest over the lifetime of the loan. However, bear in mind that the longer you plan on paying on your mortgage (the longer the mortgage term is, that is), the greater the effect interest changes will have on your monthly payments.
Residential real estate is a broad market, encompassing a multitude of products and services for both home buyers and home sellers, provided for by a widely variant network of industry specialists. If you are in the need of some expert guidance when it comes to any of your real estate needs, then look no further I’m a qualified residential real estate professional. Contact me with all your questions.
