When it comes down to making the important decisions about your home purchase, such as choosing between a fixed rate or an adjustable rate mortgage, how do you know which is best for you?
If you have found yourself scratching your head over what decision to make, here are some things to consider.
What are fixed rate and adjustable rate mortgages?
To put things into perspective, fixed rate mortgages are a more traditional choice for homeowners.
After agreeing on a length of the term as well as an interest rate, the terms remain the same through the duration of the loan.
Adjustable rate mortgages, on the other hand, can start off at a fixed rate, but eventually change based on economic factors after a certain amount of time. The amount of time before it starts adjusting depends on the loan that you get. For example, it could adjust after 3 years, 5 years, 7 years, etc.
These types of mortgages are a relatively new way for homebuyers to have control over their mortgages, but when it comes to choosing between the two, many have a hard time making a decision.
How To Know Which Is Better For You
There are several major factors to consider before making a decision between a fixed rate and an adjustable rate mortgage such as how much you can afford to put down at the beginning as well as how long you plan to live in the home.
One major incentive that many will find when looking toward adjustable mortgages is that they often offer lower interest rates to begin with, which can save homebuyers money at first.
However, homeowners who have more to put down and know they will be staying at their new home for a longer period of time may find more of an incentive to use a fixed rate mortgage. This loan option offers a stable interest rate throughout the life of the loan, which could save money in the long run.
At Camino Federal Credit Union, we know there are a lot of things to consider when purchasing a new home.
That is why we make it our number one priority to offer our members competitive loan rates and can guide our members through the process to help them get qualified for a mortgage, even if their credit history isn’t perfect.
If you are in the market for a mortgage, don’t hesitate to contact a Home Ownership Advisor at 800-835-3400. We are here to help you on your financial journey.