Fixed Rate Mortgage vs. Adjustable Rate Mortgage [mortgageinsurance-101.blogspot.com]
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mortgageinsurance-101.blogspot.com Maine Mortgage Minute for July 9, 2012
The most basic distinction between types of mortgages that are available when you're looking to finance the purchase of a new home is how the interest rate is determined. Essentially, there are two types of mortgages - fixed rate mortgage and an adjustable rate mortgage. If you choose a fixed rate mortgage, the rate of interest that you are paying on your mortgage remains the same throughout the life of the loan no matter what general interest rates are doing. In an adjustable rate mortgage, the interest rate is periodically adjusted according to an index that rises and falls with the economic times. There are advantages and disadvantages to either, and no easy answer to 'which is better, a fixed rate mortgage or an adjustable rate mortgage? The main advantage to a fixed rate mortgage is stability. Since the interest rate remains the same over the entire course of the loan, your monthly payment is predictable. You can count on your monthly mortgage payment to be the same amount each month. On the minus side, because the lending institution gives up the chance to raise interest rates if the general interest rates rise, the interest on a fixed rate mortgage is likely to be higher than that of an adjustable rate mortgage. A fixed rate mortgage loan makes the most sense for those that are going to settle into their home for many years. While the initial payments may be larger than with an adjustable rate mortgage, stretching the payments over a longer period of time can minimize the effect on your budget. An adjustable rate is one that is adjusted periodically to take into account the rise or fall of standard interest rates. Generally, the adjustable term is annual - in other words, once a year the lending company has the right to adjust the interest rate on your mortgage in accordance with a chosen index. While adjustable rate mortgages make the most sense in a situation where interest rates are dropping, though it's dangerous t o count on a continued drop in interest rates. Lenders often offer adjustable rate mortgages with a very low first year 'teaser' interest rate. After the first year, though, the interest rate on your mortgage can increase by leaps and bounds. Even so, there are limits to how much an adjustable rate can actually adjust. This is dependent on the index chosen and the terms of the loan to which you agree. You may accept a loan with a 2.3% one year adjustable rate, for instance, that becomes a 4.1% adjustable rate mortgage on the first adjustment period. Finally, there's a new kind of loan in town. A hybrid between adjustable rate mortgages and fixed rate mortgages, they're known as 'delayed adjustable' mortgages. Essentially, you lock in a fixed rate of interest for a number of years - say 3 or 7 or 10. At the end of that period, the loan becomes a 1 year adjustable rate mortgage according to terms set out in the agreement you sign with the mortgage or financial institution. Recommend Fixed Rate Mortgage vs. Adjustable Rate Mortgage Issues
Question by jrcbdc2001: No cost refinance of home in Maine? My fiance and I purchased a home in Maine, August of 2008. We have chosen to part ways and I am keeping the house. We need to remove her name from the loan and our current bank told us we would need to come up with $ 9000 in closing costs. I have heard of a streamline refinance with the possibility of either low cost closing or even rolling the closing costs into the mortgage itself. Anyone know a good bank in Maine that I should get in touch with? We currently have a loan via Maine State Housing as a first time home buyer thus giving us the lowest possible rate at the time. The current rate is around .5% less now so I am hoping that worst case scenario, I can just break even and continue with something similar to what I am paying now. Thanks. Best answer for No cost refinance of home in Maine?:
Answer by glenn
The best bet is to call your mortgage company back and talk to a differnt person and not mention that you have ever called before. I did this four times before I found someone to help me-maybe it was because I asked my questions slightly different- who knows. Second best bet is to aska freindly realtor for four recommendations of mortatge companies that do a lot of local work and call them all multiple times hopeing to get different people until you get the answer that helps you. Good luck. Your income and credit will have to be ssufficent to qualify all by yourself.
