Velocity Finance - Adjustable Rate Mortgage

Adjustable Rate Mortgage

The most common question we hear at Velocity Finance is how can I make my mortgage loans cheaper? For every individual who asks this question we have a single, totally extreme answer - take out an adjustable rate mortgage. Fixed rates are great - and with rates hovering near historical lows now is the best time to lock in on a low fixed rate - yet to get the absolute lowest rates you need to adjust.

The incredible benefits of an adjustable rate mortgage

Hold onto your hats and get ready for some real mortgage action! In all mortgages your rates are determined by one of the many financial indexes lenders use: COFI, T-Bills, TCM, or LIBOR, just to name a few. These indexes change, and this change in general rates gives rise to the adjustable rate mortgage. Allowing your mortgage rate to adjust with the winds of financial change might be a frightening, dangerous proposition, but at Velocity Finance we appreciate risk because it inevitably leads to financial savings:

your adjustable rate mortgage will have an initial fixed-rate term ranging from anywhere between 6 months and 10 years. This initial rate will be significantly lower - 1-4% APR lower - than fixed-rate mortgages because of the risk associated with an adjustable rate.
But that risk is oftentimes never an issue. Most people with an adjustable rate mortgage sell their homes before the adjustments kick in, or take out a refinance mortgage and settle in on a low fixed rate when the time comes and they are absolutely sure they will be remaining in their home.

An adjustable rate on your home mortgage is an incredible advantage for first time buyers looking for the absolute best deal. But they are also appropriate for the financially sound and savvy, offering lower rates, lower costs, and greater flexibility than the fixed rate option.

How dangerous an adjustable rate mortgage might be

mortgage rates everywhere have been falling for years now - and most are screaming downward toward a low-rate floor. Once this level is reached the rates on your mortgage can only go up, and if our financial experts are worth their salt mortgage rates everywhere are soon to rise. The rise might be entirely insignificant, or they will be so great as to make an adjustable rate very frightening. You must make sure you have the refinancing option attached to your adjustable rate mortgage agreement - if not, choose another lender. The last thing you want is to be stuck in a situation where your interest rate will greatly rise. So get crazy on your lenders, let them know that you are in change and that you are the only person who has any say abut your home mortgage!

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