Posted on: 29th Aug, 2009 09:20 am
Is a fixed rate or adjustable rate mortgage better?
right now mortgage rates are low. therefore, better to go ahead with fixed rates.
secondly, we should also consider the duration of mortgage.
secondly, we should also consider the duration of mortgage.
But as a generic which is preferred?
perferred is a fixed rate.
your 5 fixed rate won't change.
the adjustable rates can. most have 5-2-5 caps...that means: in the first adjustment period the rate can't go up more than 5 points...then each year it can't go over 2 points after that...but over the life of the loan, it can't go up more than 5 points the original rate..so if you had a 5 % rate, it can go up to 10%...but 10% is the highest it can ever go.
most people think...that would never happen...but it could, are you prepared to pay that high of a rate.
most arms are for people who don't plan to stay in the home more than the adjustment period...or who can still afford it ..it's more of a circumstantial thing.
you also have to think, when the rate adjusts..will you be able to refinance out of it into a fix if you wanted. as we can see the market can change at any time.
your 5 fixed rate won't change.
the adjustable rates can. most have 5-2-5 caps...that means: in the first adjustment period the rate can't go up more than 5 points...then each year it can't go over 2 points after that...but over the life of the loan, it can't go up more than 5 points the original rate..so if you had a 5 % rate, it can go up to 10%...but 10% is the highest it can ever go.
most people think...that would never happen...but it could, are you prepared to pay that high of a rate.
most arms are for people who don't plan to stay in the home more than the adjustment period...or who can still afford it ..it's more of a circumstantial thing.
you also have to think, when the rate adjusts..will you be able to refinance out of it into a fix if you wanted. as we can see the market can change at any time.
elnoralittle, thanks for giving insight.
thanks all
hi,
its difficult to say exactly,its depands of Factors such as loan duration, the index used by the lender, the number and timing of rate adjustments, and your assumption about the increase/decrease of future interest rates all have an impact.
its difficult to say exactly,its depands of Factors such as loan duration, the index used by the lender, the number and timing of rate adjustments, and your assumption about the increase/decrease of future interest rates all have an impact.