Adjustable Rate Mortgage VS. Fixed Rate Mortgage-what’s Best for you

Adjustable Rate Mortgages VS. Fixed Rate Mortgages

Adjustable Rate Mortgage VS. Fixed Rate Mortgage-what is best for you?

When an adjustable-rate mortgage makes sense

When the housing market began declining, many people claimed that adjustable-rate mortgages

(ARMs) were the cause. However, recently they’ve been making a comeback, especially

among affluent borrowers.

Making sense of the story…

An ARM offers an introductory period in which the borrower pays a lower interest rate

than with a fixed loan; after that, the rate can fluctuate up or down.

With rates near historic lows, the safety of locking in a fixed-rate appeals to many

borrowers. But these borrowers are paying a premium for that security. The spread

between rates on 30-year fixed-rate mortgages and the most-popular ARMs now stand

at about one percentage point, more than double the difference just five years ago.

That means that homeowners who are planning to either move or pay off their mortgage

over the next few years can save big with an ARM.

Borrowers can determine if an ARM is the right loan option for them by looking at their

financial situation and the terms of the ARM. ARMs carry risks in periods of rising

interest rates, but can be cheaper over a longer term if interest rates decline. An ARM

may be a good option to consider for borrowers who plan to own the home for only a few

years, expect an increase in future earnings, or the prevailing interest rate for a fixed rate

mortgage is too high.

Before deciding to apply for an ARM, borrowers should consider if their income is likely

to rise enough to cover higher mortgage payments if interest rates increase; whether

they will be taking on other sizable debts such as car loans or school tuition in the near

future; how long they plan to own the home; and whether their mortgage payments can

increase even if interest rates generally do not increase.

Read the full story

http://finance.fortune.cnn.com/2012/08/30/adjustable-rate-mortgage/?iid=HP_River

Sept. 6, 2012

In other news …

The New York Times

Downsizing the jumbo loan

With interest rates still low, many homeowners have been saying goodbye to their “jumbo”

mortgages and refinancing into conventional loans.

Read the full story

http://www.nytimes.com/2012/09/02/realestate/mortgages-downsizing-the-jumboloan.

html?_r=1&ref=realestate

The Los Angeles Times

U.S. home prices make biggest jump in six years

Nationwide home prices shot up 3.8 percent in July, making their largest year-over-year leap

since 2006, according to real estate data provider CoreLogic.

Read the full story

http://www.latimes.com/business/money/la-fi-mo-home-prices-20120904,0,1983417.story

San Francisco Chronicle

Repeat home buyers a rare breed

Millions of people who might otherwise be move-up buyers are stuck in place because their

homes are underwater. Even people who are not fully underwater can’t move, since they need

equity of 5 percent to pay real estate costs in a sale and then another 20 percent for a down

payment.

Read the full story

http://www.sfgate.com/realestate/article/Repeat-home-buyers-a-rare-breed-3829628.php

Sept. 6, 2012

The Wall Street Journal

The serial refinancers

Homeowners eager to lock in lower monthly mortgage payments have discovered serial

refinancing, a practice last in vogue during the housing boom.

Read the full story

http://online.wsj.com/article/SB10000872396390443713704577603201271102114.html?mod=

WSJ_RealEstate_LeftTopNews

The Los Angeles Times

Mortgage settlement with banks starts to ease foreclosure crisis

The nation’s five largest banks are off to a good start on their promise to help ease the

foreclosure crisis, providing nearly 140,000 struggling homeowners with a total of $10.6 billion in

mortgage debt relief, according to a report by Office of Mortgage Settlement Oversight.

Read the full story

http://www.latimes.com/business/la-fi-banks-mortgage-relief-20120830,0,1368246.story

The New York Times

Financing student housing

As college students prepare for fall classes, some of their parents or grandparents will be

studying up on the real estate markets near campus. Investing in student housing may not only

help to reduce the room-and-board portion of the tuition bill, but also provide a revenue source,

and in some cases, a tax deduction.

Read the full story

http://www.nytimes.com/2012/08/26/realestate/mortgages-financing-studenthousing.

html?_r=1&ref=realestate

Sept. 6, 2012

What you should know

Borrowers whose down payments were less than 20 percent of the value of the

home likely were required by their lender to buy private mortgage insurance (PMI), a

policy that protects any losses the lender might take if the borrower does not make

loan payments.

And unfortunately, PMI isn’t cheap. According to a mortgage consumer guide

published by the U.S. Federal Reserve System, PMI could cost anywhere from $50

to $100 per month.

Fortunately, borrowers can get rid of PMI. The first way, of course, is to put down 20

percent when the house is purchased. If that is not feasible, there is still a possibility

of removing the insurance.

According to the Federal Reserve, when borrowers make enough payments to gain

20 percent equity in the home (based on the original purchase price), the owner can

send a written request to the lender to cancel the PMI.

The Federal Reserve adds that federal law required PMI payments to automatically

stop once the home has reached 22 percent equity – again based on the original

purchase price and with a clean payment record.

It’s also important to know that PMI is different than LMPI, which stands for lender’s

private mortgage insurance. Some lenders buy LPMI and charge borrowers a higher

interest rate to cover the expense. According to the Federal Reserve, this type of

insurance does not automatically cancel; instead, the borrower must refinance the

home to possibly remove it.

 

I hope this has helped you to understand what type of mortgage is best for you!  Call me today to be connected with a Top Mortgage Loan Consultant!  I am looking forward to assisting you in your quest!

Author: Wendi-Mae Davis

I love what I do, and truly feel it matters-which is why and how I can be and am so passionate about becoming a partner to my client-when start to finish, of the process to buy or sell their home. There simply isn’t anything better than a smile on the face of a satisfied client…it is what I work for. True satisfaction and peace of mind for each and every person I work with, and for.

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