Adjustable Rate Home Mortgage Loans In Houston: Good Idea?

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Home Mortgage Loans HoustonWhat is an Adjustable Rate Mortgage (ARM)?

An adjustable rate mortgage, called an ARM for short, is a mortgage with an interest rate that is linked to an economic index. The interest rate, and your payments, are periodically adjusted up or down as the index changes.

What is a 5/1 Adjustable Rate Mortgage?

A 5 year Adjustable Rate Mortgage is a loan with a fixed rate for the first 5 years.  The rate changes once a year for the remaining life of the loan as the increase in rate is based on financial market conditions.

Many Houston Homebuyers Used Adjustable Rate Mortgages To Save Money On Payments In The Past

In years past when mortgage rates were higher many homebuyers considering home mortgage loans in Houston believed this was a great option for clients that needed to save money on their payment.

Adjustable Rate Mortgages Should Not Be Used In 2011, Since Fixed Mortgage Rates Are Extremely Low

In the year of 2011 consumers should really stay away from Adjustable Rate Mortgage loans, since rates are so low in general.

Today’s Rates For Home Mortgage Loans Houston

 Today a 5/1 Adjustable Rate Mortgae rate is 2.99%,

15 year fixed mortgage loan rate is 3.39%

30 year  fixed mortgage loan rate is 4.26%.

Why Did People Purchased Adjustable Rate Mortgages In The Past?

Reason #1

People who were going to transfer their employment within the 5 year period.  People who know they are going to be relocated by their employer looked at these types of loans in the past. They knew they could take advantage of the lower payment each month instead of going with a fixed rate mortgage.

Reason #2

 The family is  certain  they will not be living in this home for more than five years.  Some families realize that they may need to upgrade or downside their residence within such time.  Children may be going to college.  Parents may be planning on having additional children.   Savings once again by purchasing an Adjustable Rate Mortgage is suited for this type of Houston Mortgage Client.

Reason #3

People were sold these adjustable rate home mortgage loans in  without clarification  on the rate increasing once  the five year term is up.  In some cases, this was explained to the client, however the urgency of improving the credit score and refinancing the home was not understood  by the client.  The outcome for the buyer is never positive when this occurs.

In Today’s Market Adjustable Rate Mortgages Are Bad Idea!

Rates are so low, the amount of risk in an Adjustable Rate Mortgage does not  justify the benefits.  Saving less than .50% on a loan per month on your rate is not worth the risk.

What Are The Risks Of An Adjustable Rate Mortgage?

What happens if you do not get that job transfer as promised?  Even worse, what happens if you are laid off  due to economic conditions?

What  Risks Can Occur At The End Of The 5 Year Adjustable Rate Mortgage

What happens if you cannot sell your house with in that five year period as you planned from the start? What happens if house values fall and you cannot unload it, simply because you do not have the funds to bring to closing to make up the difference to pay it off?

The  Most Common Problem Of Adjustable Rate Mortgages

What happens if your rate goes significantly higher due to financial market conditions.  When this occurs, if you are unable to afford the new payment as the rate increases, and are unable to improve your credit to refinance your home may end up in foreclosure. 

What Is The Best Option On A Home Mortgage Loan In Houston Today?

Your best financial move is to take a 15 or 30 year mortgage.  Know exactly what your payment is going to be. Let life’s decisions be made without adding the stress of your mortgage rate changing.  Fixed rate mortgages are the best way to go in today’s market.

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7 Responses to Adjustable Rate Home Mortgage Loans In Houston: Good Idea?

  1. Tatiana says:

    I agree with many points you wrote about, but not with every one. If i understood correctly you suggest everybody to take a fixed rate mortgage, but for many people would be more suitable ARMs. For example I have one. Of course it is much riskier, but there are some benefits there too. More over there are USD Libor futures that can help you understand how much are you going to pay in future. You could do it yourself using formulas, even if it is pretty complicated or use a free mortgage calculator as http://www.mortgagecalculator3.com

    Tatiana

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