What Mortgage Type Makes Sense for You?
With interest rates fluctuating, we take a look at the comparison between Fixed-Rate and Adjustable-Rate Mortgages (ARMs).
If you’re buying a home in today’s market, it can be difficult to know what kind of mortgage gives you the biggest bang for your buck.
Leader Bank Senior Vice President of Residential Lending Sean Valiton talked about the current market conditions on a recent episode of the Building Interest Podcast, presented by Leader Bank.
“It’s up to the individual situation,” Valiton said. “Your standard 30-year fixed mortgage has been the most popular over the last couple of years, simply because interest rates have been so low … Then, a 30-year fixed makes all the sense in the world, because it’s fixed for 30 years, your principal and interest payment are going to be the same every month, and you pay that over time.”
However, with interest rates fluctuating, Adjustable-Rate Mortgage packages, known as ARMs, are becoming more attractive to prospective buyers when considering their financing options.
Whereas fixed-rate mortgages remain fixed for the term of the loan, ARMs are loans that have interest rates that can vary. These loans usually have a fixed interest rate for an initial period of time, and then can adjust based on current market conditions.
The initial rate on an ARM is also typically lower than on a fixed-rate mortgage, which can allow you to purchase a more expensive home in turn.
Last month, Freddie Mac reported that ARM sales nationally are up more than a full percentage point from this time just a year ago.
Valiton concluded there’s a key resource for soon-to-be homebuyers wading into the market. “Talking to a good loan officer who’s qualified, who can walk you through your different options,” Valiton said. “If you’re saving significantly on the interest rate, and it works for you, it’s important to just understand all the different characteristics of it.”
Leader Bank Loan Officers can help set you in the right direction. Speak with a qualified professional today!