If you’re having difficulty choosing between a fixed versus adjustable-rate mortgage in Las Vegas, NV, Blackmon Home Loans can help you make an informed decision. Both options involve different risks and benefits, so it’s important to carefully weigh the pros and cons before signing the papers.
Benefits Of An Adjustable Rate Home Loan
- Save Money If Housing Rates Go Down
- Pay Lower Rates Initially
- Build Home Equity Faster
- You May Be Able To Pay Off Your Mortgage Sooner
Maximize Savings If The Market Declines
The housing market can be highly variable, and it directly affects how much an adjustable-rate mortgage (ARM) will cost you in the long run. If housing rates go down, you could save thousands of dollars compared to if you had been “locked into” a fixed-rate loan. The reverse is also true—if the market increases, then your monthly ARM payments will as well.
Sadly, it’s impossible to accurately predict what the market will look like during the years you’re paying off your loan, so variable-rate mortgages are a risk that should only be taken if you have the financial means to survive a significant rate increase.
Pay Less Money Initially
Since lenders recognize that adjustable-rate mortgages involve more long-term risk, they’re often willing to offer you a lower interest rate at the beginning. Moreover, many adjustable-rate loans have an initial fixed-rate period that allows you to enjoy the lower rate for three, five, seven, or ten years. This makes these types of loans ideal for buyers who are planning to sell their house a few years after first moving in.
Build Equity Faster
If you opt for an ARM mortgage, it is prudent to take advantage of the lower interest rate during the fixed period by making extra payments towards your principal amount. By chipping away at the principal and building equity as quickly as possible, you may be able to reduce the overall amount of interest that you pay once the rates start changing.
Pay Off Your Principal Amount Sooner
Under certain circumstances, you may be able to pay off your mortgage sooner if you make prepayments towards the principal amount and continue to pay significantly more than what your bills require, regardless of whether the ARM rates go up or down.
However, the process of making prepayments is complicated and can sometimes still result in significant penalties even for ARMs. If you don’t specify that you want the money to go towards the principal, then it may be applied to the fluctuating interest rates, in which case you still won’t be able to pay it off early. Therefore, it’s best to do so by making lump-sum payments under the careful guidance of a financial advisor.
Deciding Which Mortgage Is Right For You
As previously mentioned, it’s not always possible to predict what the market will look like while you’re paying off your mortgage. Thus, adjustable-rate loans are best suited for people who have a high enough income stream to survive the variability. Moreover, not all types of mortgages allow for adjustable rates.
If your current income will barely allow you to make the monthly payments, then a fixed-rate mortgage is a much safer option because the rates won’t suddenly become higher than you can afford. However, if you’re able to take the risk and want to pay off your debt as soon as possible, you may want to consider a variable-rate mortgage.
Adjustable-Rate Mortgage Broker In Las Vegas
At Blackmon Home Loans in Las Vegas, we want to help you save money by choosing the mortgage agreement that works best for you. If you’re not sure whether an adjustable or fixed-rate loan is right for you, we encourage you to contact us today to schedule a professional consultation.