When it comes times to look for a mortgage, you have two basic options. These are the ARM (adjustable-rate mortgage) and the fixed rate mortgage. Both have their advantages and disadvantages—here’s what you need to know in order to find the right Home Sure Lending mortgage for you:
ARM: Pros and Cons
An adjustable-rate mortgage seems like a bad deal, as it sounds like the lender can adjust your interest rate whenever or however they like. While an ARM is more of a gamble, the truth is that your rate will stay fixed for a certain period of time (dictated by the terms of the mortgage), and is then adjusted according to a set index. After the fixed period, your monthly payments will vary depending on what rate the mortgage is set at for that day.
Again, this might not sound like a great deal and it is, in many ways, a risk. If interest rates rise, your payments rise (though interest rates usually rise because the economy is expanding which usually means a cost of living raise is in order). However, if rates drop, then your payments drop, which can be an extremely good thing.
ARMs usually come along with lower borrowing costs and initially have lower rates than fixed mortgages. There are many situations in which this could be exactly what you want and need in a mortgage.
Fixed Rate Mortgage: Pros and Cons
The assumption many make when choosing a fixed rate mortgage is that their interest rate will never change over the life of the mortgage. Insurance, taxes, and the size of the monthly payment may change, but it’s true that the interest rate does not change throughout the terms of the mortgage. With interest rates still very low, this may seem like the better option—however, there are some drawbacks.
Fixed rate mortgages usually allow very little customization or wiggle room. Plus, if there is a recession and interest rates fall, instead of increase, you would have to refinance in order to get those lower interest rates, which may or may not actually be worth the money you would save.
Which Should I Choose?
Talking to a HomeSure Lending loan officer about your specific situation is the only way to know which option would be best for you and your needs.