Since the vast majority, of those purchasing a home of their own, whether a private, condominium, or cooperative one, take advantage of some sort of mortgage loan, as part of their payment, doesn’t it make sense, they should understand their alternatives, and examine, which might best, fit their needs, and situations? In over a decade, as a Real Estate Licensed Salesperson, in the State of New York, I have witnessed, few who actually do so, rather focusing on the selling price, they pay, and the amount of their monthly commitment/ expenses. While there are multiple considerations, including lengths, points, etc, one of the major ones, is whether to seek a Fixed or Adjustable Mortgage. This article will, therefore, briefly examine and review, 4 key benefits/ reasons, for using an adjustable mortgage.
1. Qualifying: Sometimes, one may find it easier to qualify for an adjustable, rather than a fixed mortgage, because, the lower payments, are used, as part of the financial qualifying and qualification process. This may be the difference, for some, especially middle class, first – time homebuyers, between being able to, or unable to purchase one’s dream house, or home, of their own!
2. Monthly costs: If the adjustable type, creates a lower monthly payment, because of the initial lower interest rate, it may make it somewhat less stressful, to go that way! Especially, when one purchases a property, and has an excellent chance of having a substantially higher income in the future, this may be a suggested approach.
3. More house: If the introductory rate, either permits one to qualify for a higher amount of loan, or permits him to buy a more expensive house, which he desires, an adjustable mortgage, might be the preferred approach! While one should not buy or pay, more than he can somewhat comfortably afford, one’s future financial consideration and status, might suggest, this is the best course, to follow!
4. How long you’ll live there: If you plan to reside in this house, for under ten years, the lower rate, often available, with an adjustable loan, versus a fixed mortgage, may be indicated! For example, imagine, someone, aged 60 – 65, who has excellent earning power and income, and could qualify for either type, whichever offers the more attractive, lower rate, might be the best, for his life situation, and needs.
Ever since interest rates have dropped (remember when nearly every mortgage had an 8.5% rate), the vast majority of individuals, have sought and used fixed – rate borrowing. However, there are conditions, where the variable approach, might be the better alternative!