My wife and I just married and are buying a house. Should we get a fixed rate or an adjustable? Which has lower payments?
The fixed or adjustable question depends on your goals and risk tolerance. A big question to answer is: "How long will you live in the house?" If you know going in that it is a starter home and you only plan on being there for 5 years, then you might as well enjoy the lower rate and payment of the 5 year adjustable mortgage. If you know this is the home for life, then a fixed rate that is stable may be the route to go.
And I kind of already answered the question on lower payment. The ARM will usually have a lower rate and payment. But not always, it is best to talk to a professional and have them get pricing for both and help you compare. You are more than welcome to reach out to me and I can help you further.
Thank you. | 09.30.13 @ 21:50
An adjustable loan does offer a lower payment and rate. However, this product carries more risk and should only be considered by individuals who can tolerate the risk. As many can attest to today selling or refinancing isn't always an option and a homeowner with an adjustable rate could find himself exposed to an increase in rate and payment to the cap on the product. If the worst case is manageable you may want to take on the risk to save the money.
Another consideration: closing costs are typically higher on these loan. I would think you may save more money overall by opting for a, low to no cost, 30 year fixed loan. This would also allow you more time should your plans change. | 10.01.13 @ 15:11
1. Adjustable offers a smaller payment but risk short term
2. Fixed payment will be a bit higher but easy to predict the future knowing what is ahead | 10.27.15 @ 20:12