Rates May Be Rising: Mortgage And Refinancing Preparation Made Simple For You

Buying a home is probably the single largest investing most people do in a lifetime. By preparing yourself and your credit before a home purchase or refinance, you can guarantee a smooth finance procedure and can potentially salvage thousands on your loan. Better your financial profile now so you can take advantage of the low interest rates before they disappear.

Start by checking your credit

To get the best possible mortgage rate, do certain your credit history is healthy and accurate. Purpose to raise your credit score above 650 in order to measure up for most premier loans.

If your credit score is not quite 650, focusing your attempts on paying measures on time, reducing your debt balances, avoiding new enquiries and glade negative inaccuracies from your credit report.

Make certain the information on your report is right and hole any problems you discover. Give yourself 30-90 years for correcting inaccuracies. You can learn more than online in the Credit Learning Center

Found an mistake while reviewing your credit with the lender? Ask about the "rapid rescoring" procedure where you can submit a difference and potentially better your credit in 72 hours.

Figure out how much you can afford

The regulation of pollex is that most borrowers can afford a home that tallies about two-and-one-half times their annual salary.

Calculate your loan-to-value ratio to see how much you can afford to borrow by dividing the loan amount by the property's value. If your loan-to-value ratio is above 80 percent your rates may increase significantly. Find a less expensive home or salvage up for a down payment to lower this percentage.

Calculate your debt-to-income ratio by adding up your monthly debts and dividing by your monthly income. A debt-to-income ratio under 20-39 percent is usually considered good and will assist you be perceived as financially stable.

Don't be afraid to begin small. Just because you may measure up for a large loan doesn't intend that it is a smart financial determination to purchase as large a home as possible. Take a careful expression at your household budget and your lodging needs before you make up one's mind how much you can really afford.

Be a smart borrower this summertime and salvage thousands by preparing your credit before you apply for a loan. Find out the loan rate you rate at Legal Helpmate Corporation

Refinancing Your House? Time is Money With Mortgage Refinance

Timing is everything – at least that’s what most folks would have got us believe. But the world of the state of affairs is that it is often impossible to clip financial moves to match with the financial markets.

With that said, it is of import to look at refinancing as a tool to assist you attain your financial goals. See your mortgage an investing vehicle, much like your 401K nest egg plan, college nest egg or other investing account that you have.

Consequently, it is more than of import to concentrate on when to refinance in order to ran into specific financial goals, not just what the interest rates are at the time.

For instance, perhaps you are only a few old age away from retiring but you’ve spotted your dreaming home in an country that you program on moving to once you’re done punching the clock. If your home have appreciated significantly over the past few years, considering cashing out the equity in your home now to lock in today’s rates, and usage the cash to purchase your new home. That way, when you sell your home here and finally make retire, you could final payment your mortgage entirely and have got got no payment!

You might have children heading off to college in the close future. See taking the equity from your home today to pay for college tomorrow. This volition also give you a opportunity to compose off the interest when Junior travels to Harvard, which is more than than we can state for student loans.

Finally, many sharp investors are purchasing investing places since existent estate have proven to be a wise investing over the years. Tap your existent home to do the down payment, thus assuring positive cash flow on the rental property at a lower interest rate than if your funding an investing property.

While there are infinite other scenarios, the of import portion is to acknowledge that your mortgage is an built-in portion of your overall financial ends and should be treated as such. Similarly, your mortgage lender should move like a financial advisor in these states of affairs and lead you in the right direction to guarantee financial success. Not just today, but tomorrow too.

Refinancing After Bankruptcy - Is Refinancing Your Home a Good Idea?

Refinancing your home after a bankruptcy is similar to buying a new home. A refinance makes a new mortgage to replace the existent mortgage. Thus, you are required to finish loan applications and pay shutting costs and other fees. Some believe that obtaining credit following a bankruptcy is impossible. However, this is the best manner to reconstruct your credit. Some people take to get new credit cards or lines of credit. On the other hand, if you are hoping to have got an interest rate reduction on your mortgage and have cash-out at closing, refinancing after bankruptcy is a great idea.

Obtain a Lower or Fixed Rate

If you purchased your home before interest rates began to decline, you likely have a rate that is considerably higher than current trends. Assorted lenders are willing to impart money to people 1 twenty-four hours after a bankruptcy. However, if you wait two old age after a discharge before refinancing your home, you may be able to obtain a reasonable, low rate. A lower rate will lower your monthly payments. Moreover, refinancing your home after bankruptcy is ideal for obtaining a fixed rate. Initially, some people accept an adjustable
rate mortgage. These loans are risky because your mortgage rate will fluctuate according to current market trends. Thus, your mortgage may increase respective modern times throughout the loan. With a fixed rate, your mortgage rate stays the same.

Improve Your Credit History

Refinancing your home after a bankruptcy is a perfect manner to re-establish credit. Lenders reappraisal credit reports to determine our credit worthiness. A bankruptcy may unfit you from receiving low interest rates on credit cards and other lines of credit. Once you have got obtained three or four new lines of credit following a bankruptcy, and maintained a good payment history, other lenders will see you as a low hazard and are willing to widen credit with sensible rates. Moreover, mortgage companies are more than ready to allow a loan because finances are secured by the property. If you take to refinance and cash-out at closing, the finances received may travel towards repaying chapter 13 debts, which will also better credit.

Refinance Advisor Online - What to Ask Before You Sign When Refinancing

Before you subscribe your new mortgage loan, be certain that your lender or mortgage broker have disclosed their annual percentage rate (APR) and their terms. Lenders are legally required by the Truth in Lending Act to let on the cost and terms of your funding package before you subscribe any concluding paperwork. If a lender declines to uncover this information, you should happen another lender who follows the legal process.

Asking About APR

When you get shopping to refinance your mortgage, you should inquire about the APR along with other fees and rates. The APR includes the sum interest, points, and other fees. The APR allows you to do a quick comparison between lenders. However, your APR could be higher if you wish to pay points for lower interest rates.

You can name up individual lending establishments to bespeak this information or usage an online mortgage broker. With their websites you will have offers from respective different mortgage lenders. They will name out their rates and fees. You may also happen better deals on shutting costs or interest rates since online lenders have got reduced overhead.

Requesting Terms

Federal law necessitates all lending establishments to let on loan costs and terms before you subscribe for the loan. Most of the time, lenders will direct out the paperwork with your application, but some funding companies wait until the settlement period.

Once you have got your loan terms, reappraisal them carefully. The mortgage terms will include information on finance charges, payment schedule, and APR. You also have got got the right to call off your loan within three business years after settlement or receiving your Truth in Lending disclosures, whichever happens last.

Inquiring About Application Refunds

While you have the right to revoke on your home loan, you may give up your application fee depending on the lender. Application fees for processing your loan usually entire $100 to $200, which is paid with your application. All other loans fees are required to be refunded if you call off your loan within the three years of closing.

Some lenders make not return application fees if you call off or are not approved. Before you apply, it is best to inquire about refunds along with rates and fees.

To see our suggested mortgage refinance lenders online, visit this page:
Recommended Mortgage Refinance Companies Online. You should be able to happen a mortgage refinance company online
that volition work for you.

Home Loans and Mortgages - Shop Around for the Best Deal

The existent estate market have been flourishing in the U.S. for some five old age now and a record number of Americans now ain their homes. The mortgage industry have got recognized the fact that people have all sorts of needs and incomes and have provided an impressive array of different types of loans. In short, there is a loan for most everyone. If you’re looking to purchase a home, it’s cheering to cognize that there is probably a mortgage that volition lawsuit your needs. Before you run right out and mark a mortgage document, be aware that rates and fees can change dramatically from lender to lender. It pays to shop around before you buy.

Money, in the word form of a loan, is a commodity, just like anything else you would buy. There are a number of different people who can offer you this money, and the terms and terms can, and will, change dramatically. The smartest thing you can make anterior to purchasing a home is to pass a few years talking to different types of lenders to see if you can happen the best deal.

Here are a few things you should consider:

Lenders come up in different types - You can borrow from a bank, a mortgage company, or a nest egg and loan. Some insurance companies offer mortgages through affiliated lending institutions. Each establishment will have got different types of loans and terms, so it pays to speak to all of them.

Interest rates can change - The interest rate charged by each lender will change from twenty-four hours to day, but one lender may offer more than competitory rates than another, so be certain to inquire about rates.

Points and fees – Type A batch of the net income an establishment earns from a loan come ups in the word form of points and fees added to the loan. A “point” is one percent of the loan amount, and these often amount to extra net income for the lender. Compare interest rates and points when shopping around. Lower is better. And ticker out for fees. A common fee added to loans these years is an early payment penalty. Watch out for that one, or you could pay a batch of extra money should you make up one's mind to refinance later.

It’s worth remembering that fees and points are often negotiable, so don’t be afraid to inquire for a better deal. Let the lender cognize that you are shopping around; it may assist them go more than cooperative. The lending business is a competitory one, and most lenders are eager to get your business. The clip you pass shopping for a loan may salvage you thousands of dollars over the life of your loan. It’s worth the effort.

Home Equity Loan - Beware of the lingering lien!

A problem that often originates when people seek to refinance their home is the discovery of a pre-existing lien from a former loan that was not removed by the lending company. The cost of removing a lien and returning the statute title to the homeowner, a procedure known as reconveyance, is usually included in fees associated with a home equity loan. When the loan is paid off, the lender is generally responsible for removing the lien, so that public records demo the property to be unencumbered. There are assorted grounds for why the lien isn’t always removed – inadvertence on the portion of the lender, especially during heavy time periods of refinancing, is often the problem. Occasionally, the problem can originate when a lender is sold to another company or when that lender travels out of business. No matter what the cause, a lien that hasn’t been removed can come up back to stalk a homeowner. If a homeowner is in the procedure of refinancing a home and discovers an old lien that hasn’t been removed, the full refinancing procedure can be held up for weeks. This tin be critical if the proprietor is trying to lock in an interest rate prior to closing. The problem can also originate when a homeowner is trying to take out another home equity loan, perhaps to ease debt consolidation or home improvements. Here are a few things you can make to avoid this problem: Get a transcript of your credit report. If there are any errors, particularly mistakes showing an unfastened line of credit or a home equity loan that have been paid off, contact your lender. Keep your paperwork from all existent estate loans, even if you have got already paid them off. Then you will have got got got got them at manus should you need to demonstrate that you have fulfilled your obligations. If the lien shows up on public records or a credit report, but the original lender states that you have paid it, have them direct you a transcript of their certification regarding your reconveyance.As with most issues that come up up when funding or refinancing a home, this 1 can be resolved by remaining diligent and keeping proper paperwork. As always, it’s A good thought to check your credit report regularly, particularly if you be after on taking out a loan in the close future.

5 Methods Toward Reducing Your Debt

Decreasing your debt is paramount to having a good credit rating as well as giving you peace of mind. You want to get out of debt, but not all debt reduction options may be beneficial. Let’s take a look at five debt reduction options which may help you in your quest to get out of debt.

1. Consolidate Loans. Before declaring bankruptcy, consider pulling together all of your outstanding loans into one low monthly payment. Loan consolidators can help you come up with a plan to pay off all of your debt while maintaining your credit standing. Bankruptcy, unfortunately, ruins your credit rating while a consolidation loan may help you save it.

2. Your Life Insurance Policy. Your life insurance policy may have a cash value to it. Consider taking the cash from the policy and using it to pay off or lower your debt. Of course, your payout will be much lower upon your death; make sure your loved ones are adequately provided for when you have released this mortal coil.

3. Federal Loans. Government loan programs — local, state, and federal — may be available to you and at a rate much lower than what you currently pay your creditors. Check out loan programs, which you must pay back; as well as grants, which are gifts to you to see what your eligibility is.

4. Borrow From Your 401(k). If your company has contributory retirement plans such as a 401(k) or 403(b), you can take out a low interest rate loan and use the proceeds to pay off what you owe. You are borrowing from your retirement account so your loan must be paid back; if you do not pay it back you will incur IRS taxes and penalties. Still, the borrowing rates are quite reasonable.

5. Bankruptcy. The U.S. constitution gives Americans the right to discharge debt, and it is one option some must take in order to get creditors off of their backs. With medical expenses surging, gas prices hitting record high levels, and many other expenses increasing, bankruptcy may be your only choice to help protect your assets from overreaching creditors..

Obviously, some of these options have different consequences than others — like a ruined credit standing — still, when your back is to the wall your choices are extremely limited. Find your comfort level and choose an option that is right for you.

5 Home Buying Essentials

Purchasing a home involves certain important, even essential, steps that every buyer should take before closing on a purchase. Let’s examine these “essentials” which, if properly implemented, can help you save valuable time and aggravation.

1. Determine What You Can Borrow. Sure, if you know your interest rate and the length of the loan you can pretty much determine your monthly payments, right? No! You must include your property taxes, homeowners insurance, and association or maintenance fees, if applicable. These “added” costs can significantly contribute to higher monthly payments. No lender will give you a loan without figuring these costs in.

2. Know Your Fees. Closing costs can add up to the tune of several thousand dollars. Title searches, realtor fees, loan applications, attorney fees, and legal fees must be taken into consideration. Many states require lenders to give to borrowers a ballpark figure of what these costs will be.

3. Shop For A Loan. The longer you plan on staying in your home, the more likely you will want a fixed rate mortgage. If you are planning on a short stay, a variable rate mortgage may work best for you. Consider an interest free mortgage if you basically plan on “flipping” the home in one or two years. Of course, you had better hope that your home appreciates significantly in that time otherwise you may find yourself owing more than what you originally paid for the house!

4. Get Pre Approved. Realtors and sellers will take you seriously if you are pre-approved for a loan. In some cases the pre-approval will not only swing a deal your way, but you could find the sellers are more receptive to lowering their price if they believe you are a serious shopper.

5. Negotiate. You may not be able to get the seller to drop the price of their home, but you may be able to get them to sweeten the deal by including certain extras. Air conditioners, refrigerators, washers, dryers, ceiling fixtures, and window treatments are some of the things that add value to your purchase. If extra items are included in the sale, then your later pay out for these items will disappear.

In all, if you are a thoughtful and savvy shopper you should be able to save money on the purchase of your home by following these five essentials.

Don't Let Bad Credit Stop You

When I worked as a loan officer, it wasn’t unusual for me to come across people who thought they were out of luck because they had bad credit.

This is really not the case, although it is fair to say that you would not be able to walk down to your local bank, have a seat in the branch manager’s office and walk out with a mortgage.

However, there are alternatives, and you do have choices.

If you contact a broker, tell them your situation, be completely honest and up front with them, otherwise you are just wasting their time as well as your own, and believe me, whatever your situation may be, they have heard worse. Nine times out of ten they will be able to help you.

Conventional banks are not the only ones that lend money. Brokers have access too literally hundreds of banks with a wide variety of programs for people in unique situations from foreclosure buy outs, to 100% financing with poor credit scores.

I speak from experience, because when I was a loan officer I did mortgages for people in unique situations.

Foreclosure buy outs, bankruptcy, late payments on prior mortgages, the list goes on.

I would sit down with my customer, take down as much information as possible, than present their information to many different lenders for them to review. Most times I would find one with a program to help my customer.

Keep in mind, with unique situations, there is risk involved on the part of the bank, so you can’t expect to get the best rate in the world. But if it is reasonable, and can put you into the situation you want to be in, than it is well worth it.

So if you think your credit, or a bad situation is preventing you from getting a loan, think again, there is probably a program out there for you, you have nothing too loose.

Refinancing After Bankruptcy - Tips on Refinancing Your Home Mortgage After a Bankruptcy

Have you filed bankruptcy since you bought your home? Are you now looking to take advantage of lower interest rates by refinancing your home? You will probably soon recognize how much more than hard it is to finance or refinance a home after a recent bankruptcy. It is not impossible though. There are many companies online that volition aid you refinance your home.

Here are some tips to see when refinancing after a bankruptcy:

Even though interest rates have got got dropped, you may not be able to get a lower interest rate than when you bought initially - If you had nice or good credit when you bought your home originally, even though interest rates have lowered recently, you may not be able to measure up for an interest rate any lower than you had when you bought your home originally. With a recent bankruptcy, your interest rate is going to be quite a spot higher than before. There are many mortgage calculators available online that volition aid you analyse your current payment and interest rate and state you if it is better for you to refinance your home or not.

Watch out for pre-payment penalties - Even if you can measure up for an interest rate that is lower than what you currently have, make certain you don't get yourself into a loan with a pre-payment penalty. If you have got a loan right now free and clear of any pre-payment penalties, it would be a large error to lock yourself into another loan for 6 calendar months to 3 old age or more. If interest rates driblet again or you need to move, you will have got to pay about 6 calendar months of payments or interest in order to get out of the loan with a pre-payment penalty.

Beware of predatory lenders - There are many lending cozenages on the rise, do certain you are dealing with reputable mortgage lenders. Watch out for marks of fly-by-night lending practices.

Shop around - Get loan offers from at least 3 lenders. This is a good regulation of pollex with any bad credit loan. When you can get multiple loan offers, you can compare interest rates and fees. Brand certain you make not accept the first loan offered to you.

Refinance Mortgage Lenders - Finding The Best Refinance Lender

Finding a good lender to refinance your mortgage can be almost as of import a determination as the existent mortgage you choose.  Inch order to make a wise pick of a refinancing lender you should do four things:

1. Know the aim of your mortgage refinance

Do you desire to lower your current interest rate?  Generally, refinancing your mortgage can be profitable if your current mortgage is 2% higher than the predominant rates.  Bash you desire to travel from an adjustable rate mortgage (ARM) to a fixed rate mortgage?

If interest rates are creeping up this may be a good idea.  Make you desire to shorten the term of your mortgage to collect value more than quickly?  Make you desire to take cash out of your home’s equity?  The mortgage refinance lender you pick will desire to cognize your ground for refinancing so that the appropriate mortgage merchandise can be chosen.  You will also desire to be aware of your credit score and the terms of your current mortgage.

2. Know the different types of mortgage refinance lenders and the different types of mortgage refinance merchandises that are available

Just like when your home’s mortgage was originally financed, there are a assortment of lenders who can refinance your mortgage:  Banks, credit unions, mortgage companies.  There are also brokers who will happen a assortment of lenders for you.  You should be aware, however, that unless specifically contracted to do so a mortgage broker do not have got got to happen the mortgage refinance package that mightiness be the best for you.

Refresh your knowledge of the mortgage funding vocabulary.  Be fluent with terms such as as interest rate, point and prepayment penalties.  Also, most newspapers print a day-to-day listing of current interest rates for different types of mortgages.  Become familiar with these lists and check them on a day-to-day basis.

3. Shop around and happen respective different lenders to refinance your mortgage

The market for refinancing mortgages have go so crowded and competitory that it is fairly easy to happen respective lenders to compare.  You might utilize a broker.  The newspaper and the yellow pages are also good topographic points to start.  If you are comfy negotiating the Internet, it is an first-class resource.  There are many services online which will execute a preliminary search for a lender.  Your current mortgage lender should also be included in this group.

4. Negotiate the mortgage refinance loan that lawsuits your needs

Many modern times the compensation a lender makes on refinancing a mortgage is dependent on the terms of the mortgage so it is up to you to make certain that the loan received is the most advantageous for you.

You might desire to look into mortgage refinance lenders who offer no shutting cost loans or free appraisals.  It is of import to make certain that you are comparing like products.  Inch order to do this, have your lender nowadays proposals in authorship and necessitate ample clip to compare the different offers.

Prepare a listing of the characteristics of each loan.  The type of loan, interest rate, points, prepayment penalties, shutting costs are a few of the loan elements which should be compared.  Check the rate you are being offered against the rates from the most current newspaper listings.  The more organized, thorough and knowledgeable you are, the better your determination will be.

Deciding to refinance your mortgage is an of import choice that should not be made lightly.  Know why you are doing it.  Know the possibilities for refinancing lenders and merchandises that are available.  Be willing to shop amongst the different lenders and to negociate a good deal.  If you follow these steps, finding a good mortgage refinance lender will be much easier.

Home Loan Mortgage Loan Refinance - Refinancing For A Shorter Term To Save Money

Saving money with lower rates isn’t the lone ground to refinance. Opting for a shorter loan can also salvage thousands in interest and free up income in the future. Type A short term loan can also assist you pay down your principal quicker.

Better Rates

A 15 twelvemonth mortgage have a better rate than a 30 twelvemonth mortgage offered the same twenty-four hours – usually by a one-fourth of a percent. However, even if rates are the same as your current mortgage, refinancing to a shorter mortgage can salvage you thousands in interest by paying off the principal sooner. Your monthly payments will be slightly larger, but that is because a larger part of the balance is being paid.

Offers Self-Discipline

Short term loans do your determination to pay off your mortgage official. For those that have got a hard clip making extra payments on their mortgage, a short term mortgage may be the answer.

It is helpful to first expression at your long term financial goals. Perhaps you are planning to pay for kids’ college tuition, to retire, or to reduce your debt loading in the future. Decide when you desire your mortgage paid off and expression at the monthly payments. You can take a number of time periods – 15, 20 or 25 twelvemonth home loans.

Factors To Consider

Low rates aren’t the lone factor to see when crucial to refinance, the payment time period is also important. By simply making larger principal payments, you get quit of your loan sooner and salvage money on interest payments. Additionally, reducing your debt degree by paying off your mortgage also betters your credit and financial situation.

However, you should also retrieve the contiguous impact of a short term mortgage. A larger monthly payment can set a strain on your monthly budget. You may also happen that if you be after to sell your home within a couple of years, you will not reimburse the cost of refinancing fees.

You are also limiting your financial flexibility. You are committing yourself to a larger principal payment. You could take to simply pay down the principal when you have got got the available cash.

In the end, short term mortgages make have their benefits and should be considered when you be after to refinance.

Rates May Be Rising: Mortgage And Refinancing Preparation Made Simple For You

Buying a home is probably the single largest investment most people make in a lifetime. By preparing yourself and your credit before a home purchase or refinance, you can ensure a smooth finance process and can potentially save thousands on your loan. Improve your financial profile now so you can take advantage of the low interest rates before they disappear.

Start by checking your credit

To get the best possible mortgage rate, make sure your credit history is healthy and accurate. Aim to raise your credit score above 650 in order to qualify for most prime loans.

If your credit score is not quite 650, focus your efforts on paying bills on time, reducing your debt balances, avoiding new inquiries and clearing negative inaccuracies from your credit report.

Make sure the information on your report is correct and fix any problems you discover. Give yourself 30-90 days for correcting inaccuracies. You can learn more online in the Credit Learning Center

Found an error while reviewing your credit with the lender? Ask about the "rapid rescoring" process where you can submit a dispute and potentially improve your credit in 72 hours.

Figure out how much you can afford

The rule of thumb is that most borrowers can afford a home that runs about two-and-one-half times their annual salary.

Calculate your loan-to-value ratio to see how much you can afford to borrow by dividing the loan amount by the property's value. If your loan-to-value ratio is above 80 percent your rates may increase significantly. Find a less expensive home or save up for a down payment to lower this percentage.

Calculate your debt-to-income ratio by adding up your monthly debts and dividing by your monthly income. A debt-to-income ratio under 20-39 percent is usually considered good and will help you be perceived as financially stable.

Don't be afraid to start small. Just because you may qualify for a large loan doesn't mean that it is a smart financial decision to buy as large a home as possible. Take a careful look at your family budget and your housing needs before you decide how much you can really afford.

Be a smart borrower this summer and save thousands by preparing your credit before you apply for a loan. Find out the loan rate you deserve at Legal Helpmate Corp

Turn That Fixed Rate Mortgage Into A Goldmine

When you purchased your home, you most likely got a fixed interest rate mortgage with a 15 or 30 year term. These are the most popular mortgages in the industry. Even in the summer of 2004, when the interest-only or simple interest mortgage loans became popular, the average American stuck to the fixed rate. You see, the fixed rate offers security to conservative people, and the average American home buyer and home owner is a very conservative person.

Today, it's time to ignore that conservative nature and throw out that fixed rate mortgage. If you have a home, no matter when you purchased or refinanced your mortgage, you now need to refinance your fixed interest rate mortgage to an adjustable rate mortgage.

Now, before you begin to panic and start calling me all kinds of unsavory names, read on, and you'll see why an ARM is actually a cash goldmine, and you need to start panning for this gold immediately.

When I was originating loans fulltime, I could barely get the word ARM out of my mouth, before the customer would say, “Oh no! I don’t want an adjustable mortgage. I’ve heard how the rates change and your payment skyrockets, and some people actually lose their homes. No, no, I don’t want my rate to change.” Of course, once I illustrated the thousands of dollars they would save in just a few years and quashed all of those myths about loan payments “blowing up,” most of them decided the ARM was not the “devil loan” it’s made out to be.

But why risk an adjustment of your rate, you may ask, when you can have it fixed for the life of the loan? The answer is twofold and quite simple. The first part is the most important, and that is the average American either sells or refinances his or her home in four to seven years. So, if the chances are that you’ll sell or refinance in five years, why fix your rate for 30 years at a higher interest than you can get on an ARM?

The second reason to get an Adjustable Rate Mortgage is because the interest rates are so much lower than fixed rates. And since these great rates are fixed for a particular period, five years on a 5-year ARM and three years on a 3-year ARM, there really is no risk, at all. Again, in most adjustable rate mortgage programs, the interest rate does not adjust monthly or yearly
(although programs with these types of adjustment periods do exist at much lower rates).

For example, as of publication of this article in 2004, the 30-year fixed rate mortgage was going for around 5.75%, and a 5-year Adjustable Rate Mortgage was going for about 4%. Suppose you’re financing $100,000. The 30-year fixed rate of 5.75% would give you a monthly payment of $583.57 (not including your taxes and insurance, which vary from state to state and county to county). The same $100,000 financed at 4.0% interest yields a monthly payment of $477.42. The difference in these two payments is $106.15. This is $1,273.80 each year, and $6,369.00 for five years. I can hear you saying, “Wow, that’s hard to believe,” but these are real numbers and real savings. You may be saying, “Sure, but the rates change.” This is true, but the difference in the fixed rate mortgages and the ARMs is almost always the same, regardless of what rates the market bears, so you’ll always save a ton of money in the difference in these two payments.

The numbers are even more staggering if you finance $150,000. The fixed rate payment is $875.36 and the 5-year ARM payment is $716.12 – a monthly savings of $159.24 and over $9,500 for five years. If you buy or refinance a home and finance $200,000 or more, you’ll save between $13,000 and $15,000 over five years, with the 4% rate as opposed to the fixed rate of 5.75%.

Bank that money and you can buy a decent car for cash, or pay for a year of college, or take a European vacation. Pretty powerful stuff, huh? Now, if you’re one of those people who is really into cutting into the term of your mortgage, and you can afford the higher fixed-rate payment, simply apply the difference back to the principal loan amount. You’ll build equity in your home very quickly, and you'll always have the option of paying the lower payment.

So, get your adjustable rate mortgage today, and start using your own personal goldmine.