1. Adjustable Rate Mortgages* initially have a fixed rate for a period of one year (3.875%), three years (3.25 %), five years (3.125%), or seven years (3.125%) increments. This means your monthly payments would be the same each month until the anniversary of your contract. At that time, the financial institution will automatically raise or lower your monthly payments based on the current prime rates. It is a gamble on whether or not you think the mortgage rates will be lowered or increased.
2. Fixed Rate Mortgages* are normally figured on fifteen year (3.5%) and thirty year (3.0%) contracts. If you choose the fixed rate mortgage, this means you will be paying the same monthly payment throughout the term of your mortgage contract. Most buyers prefer the fixed rate mortgage. If the prime rate increases substantially during the term of your loan, you will be happy you chose the fixed rate option. If, however, the prime rate is reduced enough to make a difference in your monthly payments and the overall cost of the loan, you might consider re-financing the loan.
3. Whichever mortgage loan you choose, we can advise you about all closing costs, whether or not you are required to have an mortgage escrow account and private mortgage insurance. You will also need to know if there are penalties for cancellation or an early payoff. If you pay extra on the principal each month, you can save thousands of dollars over the period of the loan.
*Rates and payments are based on mortgage rates quoted at a local financial institution.