Fixed vs Adjustable Rate Mortgage?

As we review the current mortgage crisis, the question that comes screaming out loud is “Do we play safe and go in for a Fixed term mortgage?”. The answer is “Depends”. The various ARMs that were sold by lenders to innocent borrowers who did not read the fine print or understand their home affordability led to this mortgage crisis. That does not mean ARMs are bad. They are great depending on the objectives of your real estate purchase. For most average borrowers the below may serve as a rough 1st step guide to assess your choice of a fixed or Adjustable mortgage for your Charlotte Real Estate. Please discuss with your mortgage lender.

1. Duration of stay in new home is less than 3,5,or 7 years (depending on the type of ARM your leaning towards)
2. If you plan to pay off the loan or refinance the loan in that period
3. The current interest rates
4. Level of risk – your affordability to make payments

Based on your answers to the above, if you plan to stay in your house for less than the duration of the ARM (3, 5 or 7 years) or plan to pay off the loan, then you should go with an ARM. You get the benefit of lower interest rates then a fixed term mortgage. However, if your risk level is high and your affordability is in question after the ARM period, then a fixed term mortgage is a good choice. Please assess your financial situation thoroughly with a qualified lender before making the final decision.