Five Things You Should Know About Adjustable Rate Mortgage Rates Today
Homeowners across the United States have been debating for some time now the validity of resetting their 5 year ARM rate cap on their mortgage. There is mixed messaging about this issue. Some groups say it is a good thing to reduce the amount you pay in interest, while others decry it as a way of protecting insurance companies and speculators from competition. In essence, there is a bit of both opinion and reality with resetting your ARM rates.
Homeowners who took advantage of adjustable rate mortgages (ARM) during the housing bubble did not consider resetting their rates. The rationale was that they would simply be paying more in interest if they increased their loan amounts, rather than lowering them. They were right at the time; ARM mortgages enjoyed higher default rates than their fixed-rate counterparts. It is easy to understand why many homeowners felt that it was best to ride out the housing bubble. Today, most people realize that this strategy was a big mistake.
Mortgages are not tied to an asset. When you borrow money to purchase a home or refinance a mortgage, the payments represent a promise to pay a certain sum of money over an agreed upon period of time. In order to make sure that the lender will continue to honor the loan after the specified timeframe, homeowners must put up solid financial assets to secure the mortgage. During the housing boom, this meant low fixed-rate interest rates and high adjustable-rate mortgage rates.
Mortgage lenders want to give you the lowest possible interest rate. They also want to collect the largest amount of principal paid out. In order to attract borrowers, mortgage lenders often offer attractive fixed-rate ARM mortgages with adjustable interest rates. You can choose to refinance with a new mortgage lender or use one of the existing institutions offering you a fixed-rate loan. To determine which option provides you the best long-term results, look for the following features:
If you do a little homework, you can find out how mortgage buyers like to shop for adjustable rate mortgages. Most homeowners like to take advantage of the lowest rate available to them. However, sometimes choosing the lowest rate available turns into choosing the highest possible interest rate, which could cost you thousands of dollars over the life of your loan. To avoid taking a risk with your finances, learn how to read a mortgage lien. If the loan was sold to a third party and it’s not clear who the seller owes the money to, the buyer might not be legally able to take possession of the property.
Adjustable rate mortgages come with an introductory period, where you can lock in low interest rates. However, the fixed-rate loans you can get after the introductory period will cost you more in interest. Before you decide to take on adjustable rate mortgages, look at the different types of mortgages available to you.
If you want to pay off your mortgage faster, consider looking at fixed rate loans for your home. These are great ways to secure financing in a hurry, as they are generally available for up to twenty-five years. Look at interest only mortgages, which will cost you less in the long run because they won’t accrue any interest or principal. On the other hand, if you’re looking for faster financing, consider the ARM option. Here are five things you should know about adjustable mortgage rates today:
Want to find out more about adjustable mortgage rates today? If you’re not sure about your ability to choose a fixed rate loan, you might consider applying for a secured loan from a local bank or credit union. Many local banks and credit unions offer fixed-rate home loans that will help you get started saving money right away. When you shop around for the best fixed rates, keep in mind the terms of your agreement. Some lenders will let you finance your home loan for five years with only 0 points or very little interest – which can make all the difference!