Use A Mortgage Calculator To See If A Fixed Rate Is Always Better Than An ARM Rate
April 6th, 2010 | 
Author: There’s a lot to take into consideration when looking at current interest rates because it’s possibly a decision that you’re making for the next 30 years. The two basic mortgage loans are a fixed rate mortgage and a ARM rate, or adjustable rate mortgage. One isn’t better than the other, but they are better for your situation compared to someone else’s.
You can use a Mortgage Calculator to determine the best monthly payment available. All the different types of loans have different interest rates and different factors to take into consideration.
A Fixed Rate Mortgage is the most popular loan available. It’s an interest rate that stays the same over the course of the loan no matter what. If you get a 5% fixed rate and interest rates shoot up to 10% you still only have to pay the 5%. Also, if you get a rate of 15% and interest rates go down to 6% you can refinance for cheap and save a lot of money on your monthly payment. That’s why it’s the most popular.
An ARM Rate mortgage is the next level up in the risk category. You might see something like 3/1 year ARM rate. Let’s say you can get 4.50% which is better than the fixed rate of 5% so it looks more attractive from the start. Well, the “3″ in the 3/1 means that the 4.50% stays the same for 3 years no matter what. Then it adjusts up or down at a maximum of 2% with the new current interest rates. So if the new interest rate is 6.0% then yours will jump 1.50%. You should use a free mortgage calculator to see that it’ll increase your monthly payment by a lot. Then the “1″ in the 3/1 means after the 3 years go by, the interest rate only stays the same for 1 year at a time. It could be a lot of added pressure to the already high stressed home buying experience.
ARM rates are a great idea when interest rates are high, like 20 years ago when the were in the teens. The odds are higher that they will drop because they’re abnormally high. When rates are this low however, you’re much better off choosing the fixed rate.
Sometimes people only plan to own for 2-3 years when they’re buying a home. Then you can go after the 4.50% for 3 years because the interest rate wont change over that amount of time. Other than that situation, I don’t see any reason to get an ARM rate in this economy.
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- A Bamboozling Dilemma: Fixed Rate or Adjustable Rate Mortgage?
- Mortgage Calculator – Get to Know More About Mortgage Calculator
- How to Use a Mortgage Calculator
- Why Do you Need a Mortgage Calculator?
- Are fixed rate mortgages better?
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Posted in Uncategorized | 
Tags: amortization schedule, arm rates, borrowing power, Fixed Rate Mortgage, monthly payment, mortgage calculator
9 Responses to “Use A Mortgage Calculator To See If A Fixed Rate Is Always Better Than An ARM Rate”
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That is a great video, you break it down very well.
mortgageartist. com
The best thing you can do is arm yourself with knowledge, even better if it’s free. a little time and a few clicks now could save you years and thousands of dollars later.
the choices you make today define your tommorow.
hoyl hell this guy is a good sales man, but being in the mortgage industry my sell i see right through alot of his bulshit. GETTING YOUR LOAN THROUGH A BROKER MEANS UR GOING TO PAY MORE IN FEES, BECAUSE THAT LOANS GOING TO JUST END UP AT ONE OF THE BIGGER BANKS IN THE LONG RUN ANWAYS…..
Ampedee, I’m a mortgage broker and banker. I used to work for one of the largest banks in the country and to be honest our fees and costs were so much higher than brokers. Large banks spend money on advertising and pay salaries.
very professional response b of a.
What is the Key disfavors by Having Your Mortgage
realmortgagepaid.blogspot. com
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