Good morning! Today I'd like to talk about all the different mortgages out there that are available to you. In the old days, you pretty much had two choices, a 30 year or a 15 year fixed mortgage. There were a few adjustable rate mortgages (specifically a 5/1 ARM-fixed for the first five years of your loan) but not many. Today, your choices run the gamut. the number one question you should ask yourself is how long do you plan on staying in your home. If the answer is a while, a 30 year fixed mortgage may be for you. Also consider what your tolerance for risk is. If you want something safe and secure where you'll be able to sleep at night, again a 30 year fixed mortgage may be your ticket. On the other hand, if you know you're only going to be in your home for a few years or so, and your tolerance for risk is o.k., then an adjustable rate mortgage may make sense for you.
With the above in mind, rates for 30 year fixed mortgages versus ARM's are almost identical. I'm seeing more clients interested in the 30 year fixed rate these days. If one type of loan starts to have a lower rate, I'm sure that that will be the loan of choice. These days, there's been a lot of negative press about interest only and pay option (negative amortization) loans. It's true that these types of loans have gotten many homeowners in trouble, especially if they financed 100% of their loan. The way to avoid this is to make sure you have some equity in your house whether you're buying or refinancing. I tend to take a conservative approach with everyone I work with. I definitely don't want anyone to get in trouble. I think interest only loans, for example, can make sense if someone has a tremendous amount of equity in their property. A friend of mine called me recently and suggested he wanted to do an interest only loan. His rationale was he had a lot of equity in his place and was probably going to sell in a couple of years anyway. It didn't matter to him if he made $600,000 or $620,000 on the proceeds of the sale. This was good, smart thinking. Interest only and negative am. loans can also make sense for investors who don't typically hold their property forever. The bottom line is if you have equity in your property, it behooves you to consider all your loan options. Thanks for reading! I'll talk to you soon.
Paul McFadden
