Posted on: 28 November 2018
If you're looking into a mortgage to secure financing for a home purchase, you've likely felt a bit overwhelmed with all of the different types of mortgages you can get. While fixed-rate loans offer predictable payments over the next 15 or 30 years, there are loans with adjustable rates that may look a bit scary. While the prospect of your interest rate going up after a set amount of years may seem like a bad idea, it can actually be beneficial for a couple of reasons.
Sometimes people buy a home with the intentions of not staying in it for very long. For example, you may be purchasing a studio apartment but have the intention of selling the place to buy something bigger once you get married or start a family. This means that you won't be living in the place for very long since you know you will have to sell it. Other situations include living in a location for a few years because you know that you'll be moving for work.
Adjustable-rate mortgages offer you some flexibility, since the interest rate is low for those first few years. You can take advantage of living in a home with a very low interest rate and then sell before the loan's interest rate goes up. You'll end up saving more money in the long run, since a larger portion of your mortgage payment goes toward the principal.
More Affordable Mortgages
There are times where a lower interest rate could help you live in the house you want right now without making compromises. If you see a home that is outside of your price range, it may become affordable by using that adjustable-rate mortgage.
During the next few years, many things can change that could make the home affordable where you refinance the home or you sell the home and move on to another place. For example, you may get a raise at your job or get together with a partner to form a dual-income household. Either of these situations may cause your desired house to become affordable at a later date.
The mortgage selection process can seem very confusing, especially if you've never done it before. That is why it helps to work closely with a local mortgage lender. They can walk you through all the products, listen to your needs, and help you find the right mortgage that fits with what you are trying to accomplish.
For more information, get in touch with a company such as Rio Grande Credit Union.Share