Big Mortgage Decision: Adjustable Versus Fixed Rate

When you are buying a home, you will probably need a mortgage to finalize the purchase of the house you have chosen. While choosing a home is an important decision, choosing a mortgage for the home is equally as important, and requires as much, if not more thought, than choosing the house itself.

When you go to a lender or real estate broker, you will likely be faced with two options for your mortgage: a fixed rate mortgage or an adjustable rate mortgage, commonly known as an ARM mortgage.

A fixed rate mortgage is a term mortgage for ‘x’ number of years at a fixed interest rate that is chosen and based on the economy and interest rate of the time you secure the loan. For the remainder of the life of the loan, your payments and interest rate will remain the same.

An adjustable rate mortgage is a term mortgage for ‘x’ number of years with interest rate reviews every one to three years. At the interest rate review, the interest rate applied to the mortgage amount will change by an undetermined rate.

While it is impossible to tell where the mortgage rates will be in ‘x’ number of years, there are a few factors to look at when choosing a mortgage. The ARM mortgage will immediately look like a ‘better deal’ because it will have a significantly lower interest rate than the fixed rate mortgage. However, if interest rates are already low, the ARM mortgage may end up costing you more in the long run.

A little quick research or some simple questions to your lender about past interest rates will answer the question quite quickly. Choose wisely when you pick your mortgage type -it will have as much impact on you as the house you choose does.

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Why Choose an Adjustable Rate Mortgage?

An adjustable rate mortgage is just what its name implies - a home mortgage loan with an interest rate that is adjusted throughout the term of the loan.

There are many advantages and disadvantages to choosing an adjustable rate mortgage, and it is important to weigh the pros and cons before deciding on an adjustable rate as opposed to a fixed rate mortgage. The choice of mortgages will primarily be made based on your financial situation, the current reality of the market and the trend in loans.

The greatest advantage of an adjustable rate mortgage is that it is most often offered at a lower interest rate than a fixed rate mortgage. The lender is freer to offer a lower interest rate on an adjustable rate mortgage because they do not have to guarantee the interest rate for the life of the loan, only until the first interest rate review.

In most cases, the first interest rate review occurs at one, three or five years into the life of the loan. Then it is reviewed at regular intervals after that, ranging from one to three years, usually.

Another advantage of an adjustable rate mortgage is when there is a high interest rate market at the time that you are looking
for a mortgage. If mortgage rates are high at the time you are securing your mortgage loan, an adjustable rate may afford you a lower interest rate in the future, instead of locking you into a high interest rated loan for many years. Then, when mortgage interest rates comes down, your interest rate will come down as well.

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Considering an ARM Mortgage? Be ForeARMed

When you go shopping for a house there are many important decisions to make. Not only do you have to find that perfect house that you want to live in forEVER, but you have big decisions to make at your financial institution as well. Before you go to your bank or lender, arm yourself with a little knowledge about the different types of mortgages that you will be offered, so you can make a well considered, informed decision when the time comes.

There are generally two types of mortgages - a fixed rate mortgage and an adjustable rate mortgage, or ARM mortgage. A fixed rate mortgage offers one interest rate for the entire life of the loan, while an adjustable rate mortgage offers changing interest rates at intervals of time.

By arming yourself with knowledge before you head to the lenders, you can ensure that you are going to get the product you need at the price you can afford. There are advantages and disadvantages of adjustable rate mortgages that need to be weighed before deciding for or against an ARM mortgage.

Adjustable rate mortgages usually come with a significantly lower interest rate than is offered on a fixed rate mortgage. For this reason ARM mortgages are very tempting to home buyers. On the other hand, a fixed rate mortgage offers the security and consistency of payments and interest rate throughout the term of the loan.

And don't be fooled by those low introductory rates some lenders use to lure you in. This is one of the risks of going with an ARM mortgage, because you can usually count on higher interest rates in years to come.

Is the risk worth it? This is the primary question you need to ask yourself before heading to the lender to secure a home mortgage loan. Do you go with what you know -- or risk the unknown??

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Implications Of Credit When Applying For An Auto Loan

No matter your financial situation, chances are good that you will have to take out a car loan in order to finance the purchase of your car. Whenever you t finance a loan, one of the first (and most important) thing that the bank will review is your credit history. Your financial history is also called "credit."

Credit is basically a track record that you build throughout your lifetime that is specifically tied to your finances and the management of your finances. In order to get a low interest loan, lenders want to see that you have a stable track record for repaying your debt and being fiscally responsible. So , it is ideal to have good credit in order to get the best possible loan.

Many car dealers work with customers on a daily basis to finance the purchase of their cars. Many  dealers offer poor credit car loans to customers in order to ensure that they not only get into a car, but that they get a car that is going to be safe and reliable for them to drive.

Here's a little more information about the difference between having good credit and bad credit when you go for financing .

Good Credit

If you have good credit, then you may qualify for more money and a lower interest rate. Simply put, having good credit indicates that you have intent to pay . If you have a track record for paying off debt , than the likelihood is that you will be able to pay off future debt . The amount of the loan and the specific interest rate will vary on a number of factors, including current income, credit score, debts, and other expenses.

Bad Credit

You can still get a car loan if you have less than perfect credit. However, because bad credit indicates that you may fall upon financial hard times again in the future and not be able to make your paymants, your interest rate could be higher and the bad credit car loan might not be as much as if you had excellent credit.

When you assess your credit history, you'll most likely find specific instances that have negatively affected your credit. Speak openly about these examples and explain to your lender why they are not likely to happen again in order to get the most favorable loan possible. It is also wise to have a stable source of income in order to get the best possible rate and term .

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Get debt free - 7 Simple steps towards a tension free life (A on BBB)

Can you imagine your life without mounting credit card bills, payday loans, medical bills and threatening calls from collection agencies? Well, living a debt free life isn't impossible. All you need is the determination, time and patience to find the right way out of debt. Once you get rid of the burden, you can enjoy a stress-free life.
Paying your bills on time and getting debt free is a great way to get your finances back on track. Given below is a list of 7 steps on how to lead a debt free life.

Step 1 - Admit that you are in debt problems
The first step towards a debt free life is to admit that you are in debt. Leaving bills unpaid and avoiding creditor calls isn't the solution to your debt problems. In fact it makes the situation worse. However, the fact that you're reading this article implies you have already accepted that you are in debt and you're ready to take the next step.

Step 2 - Seek professional help to get debt free
Take professional help from a consolidation or settlement company. If you'd like to obtain lower rates and consolidate your bills into a single monthly payment, then debt consolidation program is the right option for you. But if you wish to reduce the outstanding balance, then you should get enrolled in a settlement program.

Step 3 - Free counseling to help you get debt free

The consolidation/settlement company will offer a no-obligation free counseling session. In this session, a consultant will analyze your financial situation and suggest the right debt solution for you. To make his task easier, you can prepare a list of your debts/bills. Next to each of your dues, put down the name of the creditor, the total amount you owe, the rate of interest and monthly payment. This will give the consultant a better picture of your financial standing.

Step 4 - The consultant prepares a monthly budget for you

Based on the total amount you owe and your monthly income, the consultant will help prepare a monthly budget for your expenses. This is to find out how much you are left with after paying your utility bills and other expenses. The amount left over will be used to pay off your dues.

Step 5 - The consultant negotiates with your creditors

In a consolidation program, the consultant negotiates with the creditors/collection agency in order to lower your rates and monthly payments. However, if you'd like to settle debts, the consultant won't negotiate for lower rates. Rather, he'll talk to your creditors about reducing your outstanding balance.

Step 6 - Start making payments

You need to make a single monthly payment to the consolidation company which distributes the amount amongst your creditors. This goes on for 2-6 years till you get debt free.

In case you choose settlement, you'll have to stop payments to your creditors and make monthly payment to the settlement company. The payments accumulate into lump sum cash after months. The lump sum amount is then paid off to the creditors/collection agency.

Step 7 - Say a big 'No' to any new credit card/loan

While you consolidate or settle debts, make sure you don't apply for any type of credit/loan. Otherwise, it will be difficult for you to get debt free.

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