A.R.M vs fixed rate mortgage

By on Dec 21, 2013

So, the age old question, do I get an adjustable rate mortgage or fixed rate mortgage? Quite a few years ago, 2005, arms were as popular if not more than fixed rate mortgages and the main reason was there was such a massive margin between them that even a loan amount of $200,000 would have such vast savings they were hard to resist. Now, that difference is virtually erased, and in some cases 7/1 arms are higher in rate than their fixed counterparts. In that case you obviously never go with an adjustable, but when should you go with an arm?

Typically your arm buyer is in need of a jumbo, super jumbo, or specialty loan that will make the rate difference substantial enough to incur the risk. The rule of thumb I like to use is that if the savings is not 15% of the principal and interest payment than it’s not worth the risk. With that being said if you know definitely, without a shadow of a doubt that you will be selling the property or paying it off within the fixed time period of the loan always got the fixed rate. Life is always evolving and changing and the fixed rate option is a constant so peace of mind is factor #1. In some cases such as construction loans, or home equity loans there are no fixed rate options so that decision is easy since you really don’t have that option.

You can always visit my site for more information on arms. www.rhfcct.com