Many times people call us and want to know, “What’s the rate?”
They don’t ask about payments, programs, or any other variable with a loan. They just want to know the rate.
Then, they ask how much someone can save by having a lower adjustable rate versus a fixed-rate loan.
At this point in time we are looking at historical rates, meaning there really is no reason to trap yourself into an adjustable rate mortgage when the interest rate is the lowest that is has been EVER. A fixed rate loan will always have the same payment for the life of your loan. plus the fixed rate mortgages are assumable (on certain types of loans) and you will never wonder “how high can my payment go” on a fixed rate loan.
While it is true that an adjustable rate does have a maximum interest rate that you could be obligated to pay, most people don’t go into those loans looking at the highest payment. They go in looking at the lowest.
When adjustable rate loans were more popular there were a lot of people who didn’t stop to ask if they could afford the worse case scenario. They were confident in the market holding steady. Those people now would look back and see how foolish it was to put their financial security on the line — most of those people ended up losing their home. They had gotten comfortable at the lower payment and once the higher payments kicked in, and continued to rise, they had no options left to them because it was a price they could not pay. This doesn’t happen with fixed-rate loans.
Though there are valid reasons for buying a home on an adjustable rate, most of the reasons don’t make sense at today’s low rates. When you can secure your payment in a fixed rate and never have to worry about the payment increasing beyond what you know you can qualify for — and what you are comfortable at — why would you choose the alternative?
With an adjustable you are banking that things will be a certain way 3, 5, or even 7 years from now. In light of what happed to our economy, can you feel confident that you know what your future holds? With a fixed rate loan you can.
If you have any questions about fixed-rate or adjustable mortgages, please contact Creekside Mortgage, Inc. at 360.571.LOAN (5626).