RP Funding Speaks Out: Should You Get an Adjustable Rate Mortgage?
A lot of people have heard the phrase adjustable rate mortgage or ARM. But what is an adjustable rate mortgage? Are there advantages in having investment rate mortgage? And are there disadvantages?
Financial expert Robert Palmer, CEO of RP Funding & host of Saving Thousands, explains that an adjustable rate mortgage is one that may see changes in interest rates over time. The interest rates are tied to various financial markets around the world. If this is the type of mortgage you are interested in then you should consult your local mortgage broker. A UK mortgage advisor may be able to help you realise this proposition.
With that in mind and taking a look at the economy one must admit that at some point in the very near future rates are going to start going up. Therefore those that currently have an adjustable rate mortgage need to look into what their alternatives are rather than pay increased interest on their loan.
There are also many homeowners who bought a home using two mortgages to avoid private mortgage insurance or other reasons. Perhaps their lender did not offer jumbo loans over $417,000, so they were able to get two loans and make their purchase. Others back in the rougher economy of a few years ago opted to take out a second mortgage and many times that second mortgage was on an adjustable rate. Therefore many people are now finding that with the historically low interest rates it makes great sense to go for one mortgage and tie in to a locked current rate.
In General I discourage RP Funding customers from taking out adjustable rate mortgages.
Adjustable Rate Mortgage Facts
It’s important to look at all of the factors that affect your current adjustable rate mortgage. As we said earlier adjustable rate mortgages are based on different factors. No one knows exactly how fast or how high interest rates might go. But you need to have your particular mortgage analyzed to see just how fast it could go up based on the original agreement. There may be caps put in place that put a hold on increases at a certain level. If you do not know the actual contingencies of your mortgage, it will pay dividends to allow RP Funding to review your mortgage language and discuss possible alternatives.
The mortgage professionals, like those at RP Funding, can quickly let you know if you are in the mortgage that could rise significantly or you might be in an adjustable rate mortgage that is written in such a way that you may not have to move quickly. In either situation being an informed consumer is being a powerful consumer.
For those with both a first and second mortgage on their home this makes a lot of sense. It seems as though the first mortgage is going down with each payment especially once someone is several years into the loan, but the second mortgage is many times based on an interest only payment or a teaser rate that does increase. For these people it often makes good sense to roll those two mortgages into one low rate mortgage and then have only one payment per month.
Another consideration is that many people who entered into a home equity line of credit some 8 to 10 years ago will find when they look at the language that the cost of that note could increase significantly in the 10th year. This is a surprise you do not want.