mortgage Directory

mortgage Articles

WRITERS WANTED! (click-me)

Feature Article:

How to Secure the Best Mortgage Deal and Save Yourself Thousands in Interest
When you consider that the average home owner will pay out far more in interest over the lifetime of their mortgage than their home actually cost in the first place, you can see why working to secure yourself the best possible mortgage deal now...
...Read More



Adjustable Rate Mortgages - Understand the Benefits Compared to a Fixed Rate Mortgage

www.bigmailnow.com       Navigation

Adjustable rate mortgages can be very tempting to home buyers, yet they carry a great deal of uncertainty. Fixed rate mortgages offer rate and payment security, but they are more expensive. It is important to weigh the pros and cons of ARMs and fixed rate mortgages before you decide which is right for you.

There are many benefits with an adjustable rate mortgage. One benefit is that they usually feature lower rates and payments early on in the loan term. Lenders can use the lower payment when qualifying borrowers, therefore borrowers can purchase larger homes than they could otherwise afford. ARMís allow borrowers to take advantage of falling rates without refinancing. Instead of having to pay closing costs and fees, borrowers can just sit back and watch their rates fall without worrying about these extra costs. Adjustable rate mortgages can help borrowers save and invest more money. Someone who has a payment that is say $200 less with an ARM than with a fixed-rate mortgage for a couple of years can save that money and earn more off it in a higher yielding investment. This type of mortgage also offers a cheap way for borrowers who donít plan on living in one place very long to buy a house.

There are also a few drawbacks with Adjustable rate mortgages. One drawback is that rates and payments can rise significantly over the loan period. For instance, a 6% ARM can end up at 11% in just three years if rates rise in the overall economy. A borrowerís initial low rate will adjust to a level higher than the going fixed rate level in almost every case because ARMs have initial fixed rates that are set artificially low. The first adjustment can be hard hitting because some annual caps donít apply to the initial change. Someone with an annual cap of 2% and a lifetime cap of 6% could potentially see the rate shoot from 6% to 12% in 12 months after closing rates in the economy skyrocket. Adjustable rate mortgages can be difficult to understand.

Lenders have much more flexibility when determining margins, caps, adjustment indices and other things, so new borrowers can easily get confused or trapped by less than honest mortgage companies. One last drawback to adjustable rate mortgages is that on certain mortgages called negative amortization loans, borrowers can end up owing more money than they did at closing. This is because the payments on these loans are set so low they only cover part of the interest due. Any additional amount will get added into the principal balance.

As you can see there are many pros and cons to adjustable-rate mortgages. You must carefully consider your options before choosing a mortgage that is right for you. Stay informed of all of your mortgage options.

To view our list of most recommended mortgage lenders, visit this page: Recommended Home Mortgage Lenders

About the Author

Carrie Reeder is the owner of ABC Loan Guide. It is an informational loan website, with informative articles and the latest finance news.


More Reading:

A Brief Commercial Mortgage Guide

Home Mortgage Refinancing A second chance for homeowners with high interest loans

How to Get a Mortgage if you re Self Employed

Get a biweekly mortgage or make extra payments on your own

What is a Mortgage

Refinancing Your Mortgage Can Really Save You Money

mortgage Home

mortgage Directory

Additional Reading

Real Estate Foreclosure and Your Mortgage Financing Options
Foreclosure is one of the risks involved in engaging in business or owning a property if financing comes from a lender which can be a bank, an institution, family and friends and any agencies that can provide the needed amount. Owning a home is...
...Read More

Endowment Mortgages & Endowment Shortfalls
Endowments and endowment mortgages have received a lot of bad press in recent years, amid concerns over falling policy values and accusations of endowment misselling. This article attempts to answer some of the questions and concerns you may...
...Read More

A Blanket Mortgage covers multiple properties on the same loan
Blanket mortgages are mostly used by commercial developers for one of two purposes: first, they might have a plot of land that they plan to develop into multiple lots and sell them off. Instead of getting a mortgage on each individual lot, they...
...Read More



Internet Search for: rate, mortgages, mortgage

[an error occurred while processing this directive]



Copyright    www.bigmailnow.com