You've found a home, your credit is in good shape and you have
money for a down payment. So, how do you go about picking the
right home loan for you?
Picking A Home Loan - Short Term
There are more than a few issues that go into picking a home
loan. One of the key factors is the amount of time you intend to
live in the residence. If you expect to sell within a few years,
then picking a home loan for a short term scenario is going to
be relatively easy.
ARMS - Adjustable Rate Mortgages
Adjustable rate mortgages are very good solutions for short term
home ownership situations. The advantage lies primarily in the
fact you will get a much lower interest rate on an adjustable
mortgage. This, of course, translates into lower monthly
payments, which gives you financial flexibility for the first
few years of the loan.
Interest rates on ARMS are lower than fixed rate loans for one
primary reason. With an ARM, lenders assume you intend to hold
on to the home for a relatively short period of time. As a
result, they are willing to offer lower interest rates because
they don't have to worry about getting stuck with a bad rate for
15 or 30 years. With a fixed rate mortgage, the lender runs the
risk of lending you money at a relatively low rate for a long
period of time, only to see rates rise later during the life of
the mortgage. This leaves the lender "upside down" on the loan.
Lenders make every effort to avoid such scenarios.
ARMS - Risk, Risk and Risk
The disadvantage associated with ARM loans is the inherent risk.
With an ARM, the interest rate can be adjusted on a quarterly or
yearly basis depending upon the terms of the loan. If interest
rates shoot up and the real estate market cools off, you may be
left with a loan you can't make payments on and a home with
nominal equity. This is a nightmare scenario. If you're
considering an ARM, make sure you understand how much the rate
can rise, when it can rise and what the resulting payments will
For short term home ownership situations, adjustable rate
mortgages almost always make sense. While an ARM may seem an
obvious answer, just be careful you are not stuck holding the
bag if rates shoot up.
Online Loans Made easy
What will it take for you to get a low interest, low payment loan? The answer to that question could be an online loan from one of the many companies that specializes in granting online loans, or e-loans. Some analysts forecast that as more...read more
Debt Consolidation Loans - Knowledge Is Power
A debt consolidation loan pays for multiple other loans or lines
of credit. If you find yourself swimming in debt, this might be
a good option. Debt consolidation loan is the best option when
you have maxed out your credit cards and are yet...read more