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Fixed rate verses ARMs.
What are the advantages of a fixed rate mortgage verses an adjustable rate mortgage for a first-time homebuyer?
Neil Christiansen, President and Mortgage Advisor of Capital Financial Network, shared:
As for advantages to a fixed rate loan – obviously the rate is fixed over the life of the loan. In the past, ARM’s, although carried a little more risk than a fixed mortgage. The rate was usually about .5 percent or more less then a fixed rate.
However, that isn’t the case today. ARM’s are either at or above what fixed rates are today. Some ARM’s offer an interest only feature that some borrowers can utilize to their advantage.
If a borrower is in a position to apply “chunks” of principal to their mortgage, the interest only feature automatically recasts the loan – making their monthly payment cheaper by reducing the principal amount for future payments, hence a quicker payoff of the loan.
Please let me know what questions you have about home loans, buying a home or selling your home: donna@donnahansen.net.
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