Choosing the right mortgage for you is essential because this will determine your mortgage payments for the next couple of years or so. While there is no such thing as a "one size fits all" when it comes to mortgages, how will you choose between the fixed and adjustable-rate mortgage (ARM)?
As previously reported here on Realty Today, one of the biggest mortgage mistakes you can make is not choosing the right kind of mortgage for you. This means that you need to carefully weigh your options and see if you should go for a fixed-rate mortgage or an adjustable one.
Trulia notes on some of the pros and cons of each type of mortgage, including options for the fixed and adjustable-rate mortgages. The fixed-rate mortgage is said to work best on those who want stability, as their monthly mortgage payments (almost) remain the same throughout the entire period of the loan.
However, the fixed-rate mortgage also comes with a drawback: You usually end up paying a higher interest than if you settled for an adjustable-rate mortgage. This kind of mortgage is advisable to those who are looking to live in the same property for the next 15 or 30 years of their lives.
This also works best for those who have good credit scores, as they would essentially get lower interest rates that those with poor scores.
The adjustable-rate mortgage (ARM), on the other hand, can seem like a pretty attractive option because of its lower interest rates and payments during the initial period. However, this can all change when the period is up and your rates change according to market conditions.
This type of mortgage, therefore, is said to work best for those who are only looking to live in the property for a short period of time. Those who wish to gamble and live beyond the initial period, however, should not worry because there are often limits that determine how high the rates can go.
