Whether you are looking to purchase a home or you are thinking about refinancing an existing mortgage, you have a great opportunity right now during the COVID-19 outbreak to lock in a low mortgage rate.
CNBC stated on May 15th, “The average rate on the popular 30-year fixed mortgage just fell to 3.09%, a record low, according to Mortgage News Daily.”
Nobody knows how long mortgage rates will remain this low. So, it is in your best interest to act fast to take advantage of these rates while you have the chance. But should you choose a fixed or adjustable rate mortgage?
Considerations for Choosing an Adjustable Rate Mortgage (ARM)
First, let’s talk about adjustable rate mortgages. With this type of home loan, you usually can lock in an initial introductory rate which may be lower than what you can find with many fixed rate mortgages.
After a few years on that introductory rate, the introductory period expires. Once that happens, the lender can adjust the rate based on market conditions. That means that theoretically, it could go up or down.
An adjustable rate mortgage may seem extra appealing right now if you are struggling financially because of coronavirus. You might be out of work, whether on a furlough or until you can find a new job. Should you be tempted by a low introductory rate?
While it does make sense to want to save as much money as possible over the short-term, you should always think about the long-term.
The main question you should be asking yourself is the same one that you would during ordinary times. The question is, “How long do you plan to stay in your current home?”
If the answer is, “A few years,” an adjustable rate mortgage probably does make sense at this juncture. It will probably allow you to save the most money over the duration of time you will be in your home.
But if you believe you will be in your home for a longer period of time, you should probably think about choosing a fixed rate mortgage instead.
Considerations for Choosing a Fixed Rate Mortgage
If you refinance today to a fixed rate mortgage, you will likely start saving a significant amount of money each month because rates are so low right now.
So, even though you may save a bit less than you would with an adjustable rate mortgage with an introductory period, your savings should still go a long way toward helping you stay afloat during this challenging time.
Plus, think several years down the road. By that time, who knows where mortgage rates will be? We have never lived during a less predictable time.
With a fixed rate mortgage, you will not have any questions about what you can expect from the future with regards to your mortgage rates. Even if rates rise precipitously, you will still be paying the same low rate that you locked in today.
Not only can a fixed rate mortgage improve your financial stability, but it might also reduce some of your stress about the future, giving you some much-needed peace of mind at this time.
Need Help Figuring Out Which Type of Mortgage Rate is Right For You?
At Stonebriar Mortgage, we have helped homebuyers and homeowners throughout Dallas and beyond to choose the mortgage rate format which is the most suitable fit for their needs.
During your consultation, we can discuss your financial scenario and your goals for the future. Together, we can figure out whether a fixed or adjustable rate would be ideal for you. To get started, please call (214) 669-3307.