The financial climate was rocky. I had a new house on the horizon and I couldn't be choosy about my mortgage. I knew long term mortgages would be more difficult with forecasted increases in interest. I was in love with the property; beautiful neighborhood near friends and even a few family members. My Real-Estate-Yogi representative showed me my mortgage options. He told me about the influence of market factors. Although aspects of the adjustable rate option seemed appealing, I decided on the fixed rate mortgage option; looking for a predictable monthly pay structure that would not go up when interest rates were expected to climb.
The Adjustable Rate Mortgage Option
The adjustable rate mortgage option caught my ear when the representative mentioned “low initial interest”. They said that over a period of time the interest would remain at a rate below market averages. I was on it. Then they said, however, after the fixed period the interest rate would adjust from time to time, and over the long term surpass the going rates of current fixed rate deals.
Again, for a short term mortgage this would work out great in most financial climates, and would help me out as a long term mortgage in a climate of declining interest rates, but, again, I was advised that interest rates were expected to rise. After the fixed period the interest rate adjustments are based on indexes determined by standards that dictate the market, such as the London Interbank Offered Rate.
The Fixed Rate Mortgage Option
Luckily current rates were not that high. Otherwise the going rates of the fixed rate option may have been too high for me to afford while only beginning to get my life together. With the ARM option, I would have refinanced after the initial interest term, or after I got my first raise. The truth is that going rates on fixed interest mortgage deals were affordable at this time, and they would remain with increasing salary.
With a fixed rate mortgage, payments and interest rates are fixed over the mortgage. The homeowner pays a fixed rate containing portions of interest and principal. Home owners start out by paying more towards the interest than the principal. These amounts adjust over the period of the mortgage but stay within the fixed limit.
Comparing Mortgage Deals
Rising interest rates were a big determinant in selecting the fixed rate mortgage. And sure enough they began to rise in no time. In looking at Adjustable Rate Mortgages vs. Fixed Rate Mortgages, it was crucial to note how rising interest rates would affect the pay structure. Certain ARMS are structured so that interest rates rise significantly over a short period of time.
I took out a big 30 year fixed interest loan on my property because I could afford the lower monthly payments, and would have little trouble once my salary increased. Most of the long term loan is devoted to paying off the remaining interest at the end of the principal balance.
In a Fixed Rate mortgage Comparison, shorter term mortgages result in lower overall payments, while longer terms make for lower monthly payments. Shorter term payments usually mean lower interest rates, however monthly payments are higher to make up the entire principal faster.
Real-Estate-Yogi.com can help consumers choose an ideal mortgage and hook up with lenders. They offer free consultations for their popular consumer service. Call today at 1-800-987-1397.
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