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Fixed Rate Mortgages
Fixed rate mortgages have traditionally been the preferred form of mortgage
in Massachusetts and New
Hampshire. The conditions and values that spawned the preference for long
term, fixed mortgage rates made sense 30 years
ago when home values were lower and where interest rates were destined to rise.
The thinking is always that homeowners want to protect themselves from rising
interest rates, higher mortgage
payments and avoid renewing their mortgage.
Today however, homes sell for 300,000 dollars and more and the amount of interest
that is paid by a homeowner over the life of a home
mortgage is staggering. Furthermore, the high initial payments make life miserable
for the homeowner and some actually end up defaulting on their loan because of
it. That's goes for jumbo loans and balloon
loans especially.
Fixed Rate versus Adjustable Rate Mortgage
Let’s take the example of a $300,000 home loan. The 30-year fixed rate
would yield a monthly payment of about $1,900. A one-year adjustable rate on the
other hand would result in a mortgage payment of $1,500. That's a difference of
$400 per month, or $4,800 over the next year. For a $500,000 jumbo
home loan, you’d be saving much more.
That’s a lot of money that you could put into home improvements, renovations,
or investing in mutual funds if you’re conservatively minded. So, adjustable
rate mortgages may require a little more work, than fixed rate mortgages (although
mortgage brokers and lenders may take care
of this for you). Rather than accepting varying interest rates as a threat you
must eliminate, which they rarely are, you can instead use them to your advantage.
As alternative to fixed rate mortgages, adjustable
rate mortgages or ARM’s
tied to cost of funds indexes, are a smart home buying decision. They have the
added feature of keeping initial interest rates and mortgage payments low while
you’re getting established and taking care of other important financial
and life matters. If you’re planning to buy a care at the same time, that
initial low interest payment period can help you manage the cost of a car loan.
There are many more disadvantages to fixed rate mortgages and the team at
GNA Mortgage Group can show you more specifically
how it is to your financial benefit. The GNA value proposition to you includes
using your mortgage as an investment for you. You actually make money on your
mortgage. That’s a whole lot better that paying off a house that owns you.
Success begins with planning, so call GNA Mortgage Group today to speak to a knowledgeable
professional mortgage specialist about
a Massachusetts fixed rate mortgage.
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