My wife and I just married and are buying a house. Should we get a fixed rate or an adjustable? Which has lower payments?
Answers | 4
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.
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.
2. Fixed payment will be a bit higher but easy to predict the future knowing what is ahead
Many people with Adjustable rate plans simply forgot that they purchased them and are caught off guard when the rate changes and scramble to pay the cost difference. If you're a person who stays on top of those things consider it. If you'd rather just pay the bill and have it be the same till it's paid off, go fixed.