Shopping for the right mortgage term is de rigueur whether you’re buying a detached family home or Miami condos. Two of the most popular type of mortgage option for buyers are fixed and adjustable or ARM. Though there are certainly plenty of mortgage options available, many homebuyers find themselves at ease with either of the two. To help reduce the confusion and aid you in choosing the best one for you, let’s pit these two against each other and weight each of their pros and cons.
The ARM or Adjustable-Rate Mortgages
Pros:
1. The most common advantage of ARM for Miami condo buyer is its lower rate and payment feature during the early stages of the loan.
2. ARM also allows borrowers to take advantage of falling rates without the need to refinance. They don’t have to pay for a new set of fees and closing costs.
3. ARM also helps Miami condo buyers save more money during their purchase.
4. Adjustable mortgages also offer buyers a cost-effective way of purchasing a property that they don’t plan to live at for very long.
Cons:
1. Overtime, the rates and payments will rise significantly. For instance, your 5% ARM can skyrocket to 10% if the rates rise.
2. Not easy to understand for first-time buyers. Furthermore, since lenders are the ones knowledgeable, some buyers may find themselves trapped and facing financial troubles in the future.
3. Negative amortization loans, a type of ARM, often mire borrowers in debt. In this instance, borrowers end up owning more money than they did during closing.
The Fixed-Rate Mortgages
Pros:
1. Even if the mortgage rates reache an all-time high, you don’t have to worry about your payments and rates; they will remain the same.
2. You’ll find it easier to manage your finances due to the stability offered by fixed-rate mortgages.
3. First-time buyers can easily understand fixed-rate mortgages.
Cons:
1. Fixed-rate mortgage can be quite expensive.
2. When the rates fall and you want to take advantage of market trend, you have to refinance. This means that you’ll have to shell out a few more thousand dollars, and go through the mortgage process again.
3. Unlike ARMs, where lenders can easily tailor the term for individual borrowers, fixed-rate mortgage is not customizable.
Now that you know that differences of the two, it’s up to you and your financial advisor or real estate expert to choose which one is right for you. Even if you know the nuances of ARM and fixed-rate mortgages, you still need to take several financial considerations. Think about your qualifications first in order to improve the chances of your getting the right mortgage option for your Miami condo.
Mark Michael Ferrer
Miami Condos
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