Deciding to buy a home is an exciting process, but once you find your dream home, you’re tasked with the challenge of finding the right mortgage for your budget and your needs. While finding the right house is a matter of personal preference, finding the right mortgage comes down to choosing between a fixed rate and adjustable rate loan. Your Observatory Park real estate team explains what you can expect when you opt for an adjustable rate mortgage.
Adjustable Rate Mortgages Defined
Every mortgage, regardless of type, requires that you pay interest on the loan as part of your monthly payment. Fixed rate mortgages assess a steady interest rate over the life of your loan. Adjustable rate mortgages, on the other hand, have interest rates that fluctuate based on market conditions. The type of loan you choose is ultimately up to you, but there are a few pros and cons to adjustable rate mortgages that you’ll need to consider before making a decision.
Adjustable rate mortgages often have lower initial interest rates on the loan. This, in turn, results in lower monthly mortgage payments and makes your first few months in a new home more financially feasible. Remember, buying a house requires a large upfront payment, but there are unexpected expenses like maintenance, emergency repairs, and upkeep you’ll need to cover in the beginning until you get to know the structure. Lower monthly payments means you’ll have more money to allocate to repairs or upgrades as needed.
Furthermore, you can start paying the loan down faster, taking advantage of the lower interest payments and applying more of your money to the principal of the loan. Adjustable rate mortgages are ideal for buyers looking to flip a home quickly or those who don’t plan to be in the home for a long period of time.
Because the interest rates are variable, it makes it almost impossible to accurately estimate mortgage payments each month. This causes your monthly budget to vary wildly over the course of
the year and can put a lot of strain on first-time homeowners looking to save for the future. If you’re looking for a loan that provides steady and predictable payments month after month, you’ll be better off with a fixed rate mortgage. Remember, if you plan on staying in a home for years to come, you’ll likely pay less interest by opting for a fixed rate loan with a slightly higher interest rate from the get-go.
How to Find the Right Loan
The best mortgage for your needs is the one you can afford
. Before you put an offer on a house, take the time to get quotes from multiple lenders. This way, you’ll be able to compare the amount of financing each company offers as well as the individual loan terms to ensure that you get the best deal possible.
Whether you’re buying your first home or are looking to upgrade out of your current house, the team at Elevation Group is ready to help. Contact us
today to schedule an appointment with one of our experienced agents.