You don’t have to go very far to find the news that mortgage interest rates are at historic lows. And with rates this low, common sense might tell you it’s time to lock in that low fixed rate loan, right?
Not so fast!
Remember that when fixed rates are low, that means adjustable rates are even LOWER! So that attractive 4% fixed rate might look good, but a 2.5% adjustable rate might look even better.
So now that we’ve established that low rates also apply to adjustable rate loans, let’s take a closer look at the factors that might help you determine if an adjustable rate loan is right for you.
What is an adjustable rate mortgage?
A variable-rate mortgage, adjustable-rate mortgage (ARM) or trackers mortgage is a mortgage loan with the interest rate on the note periodically adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets.
Basically what this means is that the borrower benefits from reduced margins to the underlying cost of borrowing compared to fixed or capped rate mortgages, allowing adjustable-rate mortgages to be a great way to save you money today.
Benefits of an adjustable-rate mortgage include:
- Statistics show that adjustable-rate mortgages owe back less over time than traditional fixed-rate mortgages.
- Mortgage maturities can be applied for up to 25 years instead of the 10 year maximum for traditional fixed-rate mortgages.
- Adjustable-rate mortgages allow the borrower to pre-pay principal (or capital) early without penalty.
Adjustable – as the name implies, are flexible to your financial needs. In this ever changing financial climate, secure yourself with a mortgage that can flex and change to keep up with your ever changing life.
3 signs an adjustable mortgage rate might be right for you
- You need the lowest possible payments for your mortgage over the short term. If money is tight, or you would like to put a plan in place to save the maximum amount on your mortgage payments than an ARM might be the right choice.
- You may be transferring or selling your home in the near future. ARMs offer the lowest mortgage payment options over the short term, so if there is a good chance you will be selling or moving before the fixed term ends an ARM makes sense.
- You need flexibility of terms. A fixed rate mortgage is just that – fixed. But there are several choices with ARM loans including 1, 3, 5 and 10 year fixed rates that can suit a variety of needs.
Choosing between an ARM and Fixed Rate
It can be a daunting experience when considering a new mortgage. Whether you are looking to refinance or to start a new mortgage, where do you start looking? With a multitude of mortgages, technical jargon, and everyone trying to commit you to monthly repayments, it’s hard to know where to turn for help.
The best advice I can give you when shopping for a mortgage is this:
- Research the different options available to you.
- Always ask questions if you are unsure of what is currently available.
- Develop a relationship with a mortgage lender. If you simply shop around all the time you may simply get a quote. But a good mortgage lender can be like a financial advisor and give you advice you NEED to hear instead of what you WANT to hear.
- Don’t be scared to say, “No, this isn’t right for me.”
NOLA Lending will never steer you into a mortgage we are certain won’t meet your exact needs. One of our examples of a mortgage which might be of interest to you is the adjustable-rate mortgage. The lower initial payments seem great, but for some borrowers it may not make the most sense. Our job is to provide you with sound advice based on our experience to help you make this decision.
If an adjustable-rate mortgage is not the right solution for you, fear not. We have a mortgage solution for everyone. Just ask NOLA Lending how we can help you today and one of our friendly advisors will go through each option with no obligation.
How do I apply for an adjustable rate mortgage?
If you do decide an adjustable rate mortgage is right for you – NOLA Lending is proud to offer a wide range of adjustable-rate mortgage services to meet your specific requirements. Whether you are a first time or current homeowner, NOLA Lending is confident they can find the right refinancing, or adjustable-rate mortgage to suit your needs.
Why not contact one of our fully trained members of staff today to find out how you could save money by switching to an adjustable-rate mortgage today?