I choose fixed rate 3.79% on four years. I can change my option to closing date, i can pick up the variable 2.85% closed on 5 years. Can be this one one better option ?
6 Comment(s)
I would stay away from variable. Think of the closing costs you will have to pay again. It’s a safer bet to take a 30 year fixed mortgage. What happens if things don’t turn out the way you plan in 4 or 5 years or mortgage rates are higher – what is your option then – what if the market has turned around so selling isn’t much of an option?
If you can afford a gamble then it might be advised but look at your potential cost savings – if you cannot afford a gamble or think you can’t then do the fixed mortgage.
Whenever possible, never ever pick an adjustable rate.
Is either option a ‘balloon payment”? If so, (to my understanding) this means that you pay interest only for the specified time and the full amount of the loan is due at the end of the term.
With a fixed rate, you know exactly what your monthly payments will be. Also, try to get your taxes and insurance built into your mortgage.
With an adjustable rate, the rates go up, your mortgage goes up. When the rates go down, your monthly payment tends to remain at the higher rate.
If your realtor or mortgage broker is pushing for an adjustable rate for you, look into their motives for it. Are they really interested in your best interest (which is what they are being paid for) or do they just want the commission for selling the property?
Just make damn sure that you can afford the mortgage payments no matter what the amount might be. Don’t allow yourself to be wooed by the thought of owning your own home.
I don’t think either option is good. It appears that both of those will require you to either refinance or the interest rate will adjust in a few years possibly creating a major problem (either you may not be able to refinance or the new interest rate may be too high).
The only safe interest rate is a 15 or 30 year fixed interest rate.
Make sure you get a fixed rate open end which means you can pay down the mortgage without being penalized. On the first 15 years on the 30 year mortgage, you pay about 70% in interest. That’s how most banks and mortgage brokers make their money.
I would stay away from variable. Think of the closing costs you will have to pay again. It’s a safer bet to take a 30 year fixed mortgage. What happens if things don’t turn out the way you plan in 4 or 5 years or mortgage rates are higher – what is your option then – what if the market has turned around so selling isn’t much of an option?
If you can afford a gamble then it might be advised but look at your potential cost savings – if you cannot afford a gamble or think you can’t then do the fixed mortgage.
That’s what we did.
Sahara | Jul 23, 2009 | Reply
stay with fixed. no sane person would take a variable rate.
David Z | Jul 24, 2009 | Reply
100% fixed.. With the market in flux, equity might drop more and a re-fi on your house in 5 years might not be possible.
Plus in 5 years you will be looking at thousands just to do what you should do now.
Stick to the fixed rate!!!
thatsnevergoingtowork | Jul 27, 2009 | Reply
Whenever possible, never ever pick an adjustable rate.
Is either option a ‘balloon payment”? If so, (to my understanding) this means that you pay interest only for the specified time and the full amount of the loan is due at the end of the term.
With a fixed rate, you know exactly what your monthly payments will be. Also, try to get your taxes and insurance built into your mortgage.
With an adjustable rate, the rates go up, your mortgage goes up. When the rates go down, your monthly payment tends to remain at the higher rate.
If your realtor or mortgage broker is pushing for an adjustable rate for you, look into their motives for it. Are they really interested in your best interest (which is what they are being paid for) or do they just want the commission for selling the property?
Just make damn sure that you can afford the mortgage payments no matter what the amount might be. Don’t allow yourself to be wooed by the thought of owning your own home.
Good Luck and much congrats on your new home.
Kathy M | Jul 28, 2009 | Reply
I don’t think either option is good. It appears that both of those will require you to either refinance or the interest rate will adjust in a few years possibly creating a major problem (either you may not be able to refinance or the new interest rate may be too high).
The only safe interest rate is a 15 or 30 year fixed interest rate.
Michael T | Jul 30, 2009 | Reply
Make sure you get a fixed rate open end which means you can pay down the mortgage without being penalized. On the first 15 years on the 30 year mortgage, you pay about 70% in interest. That’s how most banks and mortgage brokers make their money.
stan c | Jul 31, 2009 | Reply