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Pick the Right Home Loan - Adjustable Rate Mortgages (ARM) Give Lenders More Security - Easier To Qualify For Than Fixed Rate

July 15th 2006

Pick the Right Home Loan - Adjustable Rate Mortgages (ARM) Give Lenders More Security - Easier To Qualify For Than Fixed Rate

Home Loans

Now that interest rates have been on the rise and may go higher, fixed interest mortgages may be harder to get.  The adjustable rate mortgages give the lender a bit of security in uncertain times.  If interest rates go up, their rates can also go up. 

There are some advantages to the adjustable rate mortgage and there are some advantages to the fixed rate mortgages.  You can get some lower initial payments with an adjustable rate mortgage.  It is also easier to qualify for an adjustable rate mortgage. 

 

For the long term, if rates are relatively low, fixed rate mortgages are usually better.  You can budget you month to month bills without an increase in payments. If interest rates are in the double digits, an adjustable rate mortgage would be better.

Interest Only loans have become very popular lately.  One popular loan functions as an interest only loan and converts to either a fixed or adjustable rate mortgage after a specified period of time (like 10 years).  This is a great idea for people that either plan on moving within 10 years or expect to make more money after that period.

 

Lenders may also offer you a temporary fixed rate mortgage.  This could be a 5-year fixed rate loan and then converts into an adjustable rate mortgage.  This could be good if you plan on getting a new mortgage within 5 years or if interest rates start to decline.

Loan brokers can be helpful, but remember they get paid too.  They are a middleman, but like with anything else (like real estate agents) loan brokers can add value to your loan search.  Brokers can get your information once and shop for a home loan without running your credit each time. Each time your credit is run it shows up as an enquiry.  If you get too many enquiries, your credit score could be lowered.   

Hopefully you do your homework before deciding on a broker or lender.  Always make sure you read and understand all of the terms before you sign on the dotted line.

 
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Dan Wilson
Best Syndication

Books on Lending

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Important:  The material on Best Syndication is for informational purposes only and is not meant to be advice. You should always seek professional advice before making financial decisions. 
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