Monday, May 25, 2015

Find the Right Instrument for Your Needs

Craftsmen often talk about the importance of using the right tool for the job. When tightening a screw, they know that using the wrong size screwdriver can strip the head of the screw, potentially making it impossible to tighten fully or loosen later on. In a similar way, families or couples that employ the wrong home financing option could find themselves in a financial situation that they are neither comfortable with nor able to get out of. Thus, it is important to know some basic facts about the different types of home loan options.

Fixed-Rate Mortgages

Generally, the purchasing power of money goes down over time due to market forces; this is also true for the housing market, where the prices of homes usually go up over time. If the mortgage a home buyer applied for is affected by the market, the tendency is for their mortgage costs to go up long-term. Therefore, if a home buyer intends to own or stay within a certain property for decades, he or she will usually want to be insulated from such price volatility. In this case, applying for a fixed-rate mortgage will be ideal.

Adjustable-Rate Mortgages

While the fixed-rate mortgage is fit for long-term needs, adjustable-rate mortgages are designed for those who have a shorter time horizon in mind. People who do not intend to stay long in the home they own (whether to move to a better one or for some other reason) can avail of adjustable rate mortgages. What’s the benefit? Adjustable-rate mortgages generally have lower initial interest rates than fixed-rate mortgages. Therefore, the home buyer may imagine that he or she will be able to move out and get out of the commitment before their mortgage payments have a chance to go up. There are other home financing options, such as hybrid home loans, available for people with different risk appetites. If you are planning to buy a home and are not aware of the instruments that may be within your reach, a home financing expert such as Vahe Hayrapetian should be able to help inform you.

No comments:

Post a Comment