Me and my husband are looking into getting a two-family with my sister and brother-in-law because neither of us can afford a one-family. I just have a question about interest rates. For the homebuyers, is it better to have a fixed rate or adjustable rate?
skew
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Re: Advice on Interest Rate?
i am just as overwhelmed as you. there are so many options that it is mind boggling. personally, i don't care if we ever pay off the loan (tax benefits) and do not have a problem paying a high monthly mortgage. just trying to determine what loan is right for us. our rate of return on investments are WAY higher than the current loan rates, so for us it is better to put less down rather than tie up money that could otherwise be invested and earning interest.
KimberlyBride
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Re: Advice on Interest Rate?
Since rates are so low it is better to get a fixed rate if you plan on staying there for a long time. If you plan on moving out within the next 3-5 years an adjustable is better.
sophie78
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Re: Advice on Interest Rate?
We got a 5/1 ARM because we only plan on living here a few years. Even if we stay for seven years, we will still benefit from the adjustable.
violet
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Re: Advice on Interest Rate?
We are looking into probably staying there for at least 10 years, if not more.
Does anyone know anything about an adjustable rate where it involves you paying 7.5% more on your mortgage every 18 months? A mortgage person suggested this, but I thought that sounded ridiculous because if you've got a 4k mortgage on a two-family house, 7.5% of that is $300. That is a lot to pay more of every 18 months. Is anyone familiar with this type of rate?
ThongLori
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Re: Advice on Interest Rate?
I'm not sure what you mean.. adjustable rate mortgages do just that -- they re-adjust. I would ask again and make sure you understand what they are saying. It is confusing as heII!!!
We just locked in a 10/1 ARM with fixed interest-only payments for the first 10 years. The rate will then re-adjust each year after the initial fixed period. We have the option to pay down principal any time we want, with no penalty.
We chose this loan b/c my husband owns his company, so his income fluctuates -- sometimes frequently. So, the months we don't have extra to pay down principal, we are only obligated to make the interest payment. And, when we DO pay down priincipal, it will immediately be reflected since our monthly payment is based on the interest of the principal balance -- therefore monthly payment goes down. We will also not be in this home for more than 7-10 years.
There are a zillion options and so many factors involved in choosing. I read the book 'Mortgages for Dummies' about 3 times -- I'm serious! And it really helped me understand the fundamental differences. I also thought Ditech had pretty good explanations on its website. We also skipped all the brokers and went right to our bank. Much better service! They explained everything really well and didn't mind my 12,000 phone calls.
