Homebuyers have several loan options. Hence, purchasing a new
home has never been easier. Individuals who cannot afford a down
payment or closing costs may take advantage of loan programs
that offer assistance. Furthermore, those hoping to obtain a low
rate mortgage may consider a loan with an adjustable rate.
Because of the initial low cost of adjustable rate mortgages,
monthly mortgage payments are also lower. However, low rate
mortgages are short term. To avoid an interest rate hike,
homeowners should refinance before rates begin to increase.
Advantages of Adjustable Rate Mortgages
There are several advantages to accepting an adjustable
mortgage. For starters, a low rate mortgage allows buyers to
purchase pricier homes, while maintaining an affordable monthly
payment. Moreover, because of record low rates, homebuyers who
obtain an adjustable rate mortgage can enjoy falling rates
without refinancing their mortgage. Thus, they avoid closing
costs and other fees.
Adjustable rate mortgages are also ideal for individuals who
plan on moving in a few years. Some people enjoy the stability
of living in one place for many years. In this case, refinancing
for a fixed rate is a wise choice. However, if you prefer the
flexibility of moving every three to five years, you will save
money with an adjustable rate.
Pitfalls of Adjustable Rate Mortgages
While adjustable rates offer many attractive features, one major
drawback is that low rates are temporary. If interest rates
continue to fall, you will not be subjected to the dangers of
these loans. However, if rates begin to climb, so will your
mortgage payment. Homebuyers who cannot afford an increased
mortgage are at risk of losing their home. Thus, if your goal is
to remain in your current home for many years, refinancing for a
fixed rate will offer predictable mortgage payments.
How Soon Can You Refinance a Mortgage?
Fortunately, home mortgage loans can be refinanced whenever you
like. Some lenders suggest allowing the loan to mature at least
12 months. However, if you detect a change in market trends,
refinancing shortly after purchasing your home is a smart
maneuver. Those contemplating refinancing must be prepared to
pay additional closing fees. Moreover, contact your current
lender and inquire of prepayment penalties.
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