When it Makes Sense to Secure an Adjustable Rate Mortgage

Posted by Carey Frankel on Friday, November 18th, 2011 at 2:46pm.

For most homeowners, it just makes sense to steer clear of adjustable rate mortgages. Their unpredictability has spelled trouble for millions of homeowners across the country; particularly over the last few years. However, there are certain situations where an adjustable rate mortgage may make more sense than a fixed-rate mortgage:

·         You are certain your income will rise in the near future – For example, if you are currently low on the totem pole in your position, but you expect to make significantly more money in the upcoming years, you may choose an adjustable rate mortgage. As your income increases, you will be able to handle the rise in your monthly mortgage payments. Yet while you are making less money you will enjoy lower payments for the first few years of the loan.

·         You don’t plan on staying put for very long – If you know you are going to move before your adjustable rate mortgage adjusts then it makes sense to take out an adjustable rate mortgage and enjoy lower payments. For example, an adjustable rate mortgage may make sense for young couples who have plans to upgrade from their starter home in a few years, or for someone who knows he or she will relocate for a job in the future.

·         If you continue to improve your credit – If your credit isn’t hot, and you want to keep your monthly mortgage payments low, you may want to consider taking out an adjustable rate mortgage. Although the lender may charge you a higher interest rate because of your less-than-perfect credit, the lower interest rate on the adjustable rate mortgage will keep your monthly mortgage payments in check. Then, before the loan adjusts on your Ponte Vedra Beach real estate, you can refinance and qualify for a lower interest rate, provided you have worked hard to raise your credit score.


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