Who should get an Adjustable Rate Mortgage, (ARM)?
Most home buyers and borrowers prefer a fixed rate, but there are some who would benefit from an interest rate that starts lower. There are a few instances where a lower interest rate now is financially helpful, and a higher rate later may not matter. Here are the folks who benefit from an Adjustable Rate Mortgage:
1. Homebuyers who plan to live in a house for only a few years;
2. Buyers who expect to refinance soon, or:
3. Borrowers who expect their income to increase significantly in the near future
These individuals may decide that the short-term benefit of an initially low rate is all that matters. #ARMloans
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Some home buyers should pay discount fees and some should not. Here’s one way to determine if discount fees are a good idea for your home loan:
Buyers who don’t plan to be in a house for a long time probably shouldn’t pay discount points. The lower interest rate isn’t likely to be worth it.
Buyers need to stay in a house for a long time to recover the money they paid in discount points. #discountfee
Planning to retire from work early, or do you have future plans like starting your own business? Then you may prefer to build equity quickly and pay off the mortgage as soon as possible. You may be happier with a 15-year or 20-year mortgage rather than the usual 30-year loan. The higher payments with a shorter-term loan may mean buying a less expensive house, however.
A common type of buyer is a young couple who don’t have a high income. However, they expect their income to increase and want to buy the largest, most expensive house they can afford. These buyers might benefit from any program that would increase the loan amount they can qualify for: an adjustable-rate, a high loan-to-value ratio, a 40-year loan term, a downpayment assistance program, or secondary financing.
Some buyers don’t want to borrow as much money as lenders might allow them to borrow.
They might want to invest more money elsewhere or might not want to get overextended in anticipation of large expenses later, like having children.
Or they may simply wish to avoid the stress of loan payments that force them to budget.
In short, there is no one-size-fits-all lending solution for all buyers.
Buyers need to consider how the various financing options fit their circumstances.
The lender will take some of these factors into consideration, but ultimately it’s the buyer who must decide what type of loan best fits her financial situation.
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Copyright © This free information provided courtesy L.A. Loft Blog and LAcondoInfo.com with information provided by Corey Chambers, Realty Source Inc, BRE#01889449 We are not associated with the homeowner’s association or developer. For more information, contact (213) 880-9910 or visit LAcondoInfo.com Licensed in California. All information provided is deemed reliable but is not guaranteed and should be independently verified. Properties subject to prior sale or rental. This is not a solicitation if buyer or seller is already under contract with another broker.
