Thursday, October 24, 2013

Adjustable Rate Mortgage vs. Fixed Rate Mortgage: What You Need to Know

Buying a home in Denver for the first time is certainly exciting. You can't help but imagine the very first day you'll come home exhausted from work and walk into the front door, knowing that all the hard work you've turned in all these years have finally paid off. Before you can turn that dream into reality, however, you will need to apply for a home loan first.

The problems is that when homebuyers start shopping around for home loans, they often end up confused on which type of loan to get. An adjustable rate mortgage offers the advantage of flexibility, and if the real estate market is good, chances are, the rate will be lower. Meanwhile, a fixed rate mortgage offers the benefit of stability— you have that feeling of reassurance that no matter what happens in the real estate market, there's always a way to pay off your loan because the rate remains unchanged.

With such contrasting advantages, it is up to homebuyers like you to assess which type of loan will work best for your situation. What works for your neighbor doesn't necessarily mean that it will work for you too. What can steer you in the right direction is to think long-term; try to see yourself having problems paying off the loan, not just within a year or so but ten years down the line. If you can, you may want to try a different plan.

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