Most people purchasing a home do so by taking out a mortgage. At the same time most people focus more on the selling price of the home rather than on the mortgage. However you should take into consideration what the terms of the loan might be those include, length of time, monthly payment, type of mortgage and the points. These factors will have just as much impact on your costs as the purchase price. One of the different types of mortgages is an adjustable rate mortgage, and here are the reasons you should have one.
Qualifying for the Loan
Adjustable rate mortgages can be a bit easier to qualify for rather than a fixed rate mortgage. The reason is that they often have lower payments and these lower payments are more favorable in the qualification process. If you’re a first time home buyer this small but significant difference in the monthly repayment amount can mean the difference between getting the home of your dreams or not qualifying for a mortgage.
Monthly Mortgage Payments
Typically when you take out an adjustable rate mortgage it gives you a lower monthly payment. You are taking advantage of an initial lower interest rate and that might make the whole mortgage process less stressful. If you are buying your first property and you expect to have your income increase in the future this is probably the best approach.
Getting a Bigger or Nicer Home
If the rate that is available to you is favorable it can allow you to qualify for a bigger mortgage. That in turn allows you to buy a more expensive house, or in the case of new construction you can have more features added to the project like higher end finishes. That being said you should never take on more than you can comfortably afford but it may allow you to buy a house that needs less work done to it and with a higher resale value in the future.
How Long Do You Plan to Live There
If you don’t plan on staying there for the rest of your life or this is your first step along the property ladder then the adjustable rate mortgage is a much better choice. If you plan to buy and spend a few years there fixing the house and taking advantage of the added value and the increase in property prices then take advantage of the lower monthly payments.
While the interest rate is as low as it is most people prefer to lock in with fixed rate mortgages, but there are circumstances where an adjustable rate mortgage is better for you.