Is an Adjustable Rate Mortgage a Good Idea?

sasvings and mortgage

sasvings and mortgage (Photo credit: 401(K) 2013)

When you think of mortgages the first things you think about are both negative and positive connotations. Sometimes the word mortgage just sends people into frenzy because of the complexity behind it. Some of the more positive things that you might think of include home ownership, freedom, and a happy home. The negative connotations can be things like haggling over interest rates, choosing a lender, possible foreclosures, land and school taxes, a second mortgage to fix the house…the list goes on. Buying a luxury home can be a dream come true for many, but it can also be one of the biggest challenges that you’ve ever had to face.

Getting the Best Deal Possible on a Luxury Home

Choosing an interest rate and APR isn’t something that most people look forward to, but this can be a great opportunity for you to come prepared and get a great deal on your new luxury home. Be smart and do your research before meeting with your lender. There are two different types of loans if you exclude the reverse mortgage. They are (1) adjustable-rate mortgages and (2) fixed-rate mortgage. While both have their pros and cons, fixed rate mortgages are usually a better option for well-qualified buyers with decent credit. Adjustable rate mortgages offer the advantage of being more flexible. The adjustable rate can be compared to what some rental companies do. You’re put at one rate for a length of time, and when that cycle ends a new one begins. Say for instance you have a twenty-year loan, if you pay it off in five years the balance is notably different than making payments across the entire length of the loan.

Choosing the Right Mortgage Option for You


mortgage (Photo credit: 401(K) 2013)

Adjustable rate mortgages are good options for many luxury home buyers because they offer an incentive to pay off the loan quicker. It’s not for everyone though; some buyers may prefer the predictable stability that comes with a fixed rate mortgage. The fact of the matter is that if you’re only planning on making the minimum payments, then an adjustable rate mortgage probably isn’t for you. Adjustable mortgages add flexibility to the lending process and encourage incentives to luxury home buyers who can afford to make higher monthly payments. Although the housing and stock markets may remain bleak, owning a luxury home can provide peace of mind, comfort, security, and a sense of accomplishment. Not everyone has large amounts of cash on hand though, so be sure to choose wisely when selecting a mortgage type, and make sure that the payments fit with your long-term goals.

Don’t Let Lenders Push You Around

Remember that you are in control of the luxury home buying process. Never agree to or sign anything you’re not comfortable with. Signed contracts are legally binding and refinancing any home can be tricky. Just remember that a loan on a luxury home is completely different from a car loan. It’s run by the bank and there is no middleman. If you don’t pay the bank, they could end up owning your house (depending on your state laws). The dream of owning a house can be an amazing reality, if you make it one.