July 14, 2017
A lot of people are understandably a little wary when it comes to discussing mortgage rates and different types of mortgages because they don’t always fully comprehend their options. You might wonder what type of mortgage best suits your situation. Do you need a fixed-rate mortgage or an adjustable-rate mortgage (ARM)? The answer depends largely on your current financial means, the present state of the economy and real estate market, and how long you intend to live in or own the property. A fixed-rate mortgage basically means that no matter how much things change in the future, your mortgage rate will always remain consistent. This can be a good and bad thing depending on all of the abovementioned factors. At any given time, you could end up paying either far more or less than what your property is actually worth. Just because your interest rate doesn’t increase, that doesn’t mean the market won’t change. Adjustable-rate mortgages are the total opposite. They can be adjusted by your lender over time based on the state of the real estate market and variable interest rates. While this might not be the best option for you if you’re planning to own a property long-term, there are a few discernible benefits of having an adjustable rate mortgage.
Benefits of Keeping an ARM for a Long Time
Lower Monthly Payment
Opting for an ARM could potentially mean that you pay lower monthly rates. Your lender or the bank will usually start you off at a low, affordable rate and the interest will only increase as rates increase. This is an incentive to sign on to an ARM over a fixed-rate mortgage wherein the bank or lender takes on most of the financial burden.
With an ARM, your interest rate only changes if the current market’s rates increase or decrease. This means that as the market changes, you could either pay more or less on a monthly or biweekly basis and should be prepared for both circumstances.
Initial Fixed-Rate Period
Even ARMs entail an initial fixed-rate period, which is highly advantageous for first-time homebuyers or property owners and people who are only looking for a short-term mortgage. If you’re only planning on owning your property for a specific period of time, then you can opt for an ARM with an initial-fixed rate period of either 5 or 10 years. After that period ends, your rates become variable and change on a predetermined basis depending on your loan structure. The good thing is that during the initial fixed-rate period, you could actually end up saving a great deal of money because your interest rate will always remain at the same low amount no matter how much the market changes.
Why Choose LUSO Federal Credit Union?
More than anything, it’s extremely important to have a knowledgeable and helpful financial advisor on your side to can help you assess your financial situation accurately and guide you through the process of applying for a mortgage payment plan that works best. Not every mortgage is the same and what works for some people might not necessarily be the best choice for you. Let the financial experts at LUSO Federal Credit Union help you choose the right mortgage payment plan. We operate throughout Hampden County with offices in Wilbraham and Ludlow, Massachusetts. Contact us at our Ludlow branch at 1-(844) 587-6328 or our Wilbraham branch at 1-(800) 808-5876 to learn more.