Many reading this are old enough to remember home mortgage interest rates when they were above 15%. Compared to those days, today’s rates are at historic lows. It is possible that sometime in the future many will look back wishing they took advantage while they can.
One must be careful when scrutinizing the offered interest rate on any given mortgage. Some lenders can use tricks to make borrowers think that the rate is lower than it actually is. The devil is often in the details.
Some mortgages are what are called adjustable rate mortgages, or ARM’s for short. These loans come with an initial interest rate which then adjusts along with the prevailing market rates. The adjustment formula usually dictates the rate goes one way which is up.
These ARM’s can have low initial interest rates. Some borrowers assume that this rate will stay the same for the life of the loan. This is not the case. They are confusing ARM loans with what are called fixed rate loans.
A fixed interest rate loan never changes. You know exactly what your mortgage payment will be as long as you own the home. This allows for effective family budgeting pertaining to your housing expenses.
At the other end of the spectrum are ARM’s with extremely low introductory interest rates. These mortgages are called “teaser rate” loans. Teaser rate loans are especially dangerous and can result in a foreclosure.
When mortgage payments skyrocket it catches many families surprised an unable to afford their housing expense. It is essential that you read the fine print on any adjustable rate mortgage to make sure that interest rate is really as low as you think it is.
It is a great time to take advantage of low home mortgage interest rates. The lower the interest rate equates to a lower payment for you. Just ensure you do your research and don’t get tricked into getting a mortgage with a high interest rate disguised as a low one.