Have you ever taken a break from this demanding life, retreating from all that there is, to question why we do some of the things we do? Has it ever occurred to you that there are many decisions you have taken, not necessarily because you embarked on a personal research –but you just did? I’m sure right you would agree with me that there really are many of such instances; possibly, a choice as trouble-free as picking your favorite bistro or the intricate dilemma of purchasing an efficient car.
What’s important here is this; you took a decision. So the big question now should be, why? Could it be that you’re doing what you’re doing because nearly everyone is doing it –moving with the crowd huh? Well, while there are in no doubt indications that sometimes we take rational decisions based on research –only a small (negligible percent) of persons do this. A larger fraction of our moves are highly influenced by society. So the culprit is society; it’s the illusionary realism that silently suggests each of the many unverified decisions you’ve made – like the popularly promoted and accepted idea that Fixed-Rate Mortgage (FRM) is the best mortgage offer and good for every American citizen.
We’re jabbed in, left with no alternative but to choose FRM when there is an alternative that would not only fit as a good substitute but can go on to do even better (those who understand this, have since taken advantage of it). This better mortgaging option is the Adjustable-Rate Mortgage (ARM). Society left on its own would not survive, as its smoky screen will fade away with time. So there’s the need for an agency to keep it alive. In this case the American government is that agency; it took decisions that standardized the popular 30 years fixed-rate mortgage. It would interest you to know that the US government, according to a report by International Monetary Fund (IMF) in 2011, is at the top of the list of economical advanced countries involved in the mortgage market.
By now you should know that the aim of this article is not to discredit FRM but to provide you with an alternate option which permits you to pay less for your dream house. FRM requires you walk into a bank, get the paper work for your loan done, and agree on the fixed interest rate to be paid over a spread space of 30 years, ARM is however intricate. First, the interest rate to be paid in the early years is quite less when compared to that of FRM. But when these years are completed, the interest rate and monthly installment changes in accordance with the earlier stipulated loan margin. So a loan with a low starting interest rate saves you a lot of money in the early years of the mortgage loan. Another good side to this is you can buy a more expensive house with an ARM that has same monthly installment as a FRM.
That’s not all, if you plan to live in a house for a short period of time, ARM would still be the best option. All you need to do is choose an ARM whose early low interest rate covers the number of years you need to stay in that house. And lastly, you can always switch to another company that provides a better package. This clearly proves that people who want to spend less for more can always consider opting for AFM.
Keep in mind that, if you’re looking at continuing to with the mortgage after low interest years are completed; you will need a lot of good luck. This is because of the uncertainty surrounding the nature of mortgage rates cannot be projected. If there’s an increase in mortgage rates, your monthly installment will also increase. Still this shouldn’t stop you from choosing the adjustable-rate mortgage if for the season it is what is what you need. So, when next you’re about to go for a mortgage loan, don’t just go for what’s trending or the norm. Carefully examine both options before you leap.