How do you get a low-interest rate loan?
Price discounts and interest rate buydowns are common incentives offered by new-home builders trying to overcome slow sales.
Buydowns are a financing technique used to reduce the monthly payment for the borrower during the initial years of the loan. Under some buydown plans, a residential developer, builder or the seller will make subsidy payments (in the form of points) to the lender that "buy down," or lower, the effective interest rate paid by the home buyer.
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choosing between fixed and adjustable rates |
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Written by Joel Nelson
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How do you choose between fixed and adjustable rates?
There is risk involved in selecting an adjustable rate mortgage, or ARMs, because rates may go up. On the other hand, a fixed-rate loan offers good protection against rising interest rates but the borrower is stuck with the initial rate if interest rates drop.
Statistics show that home buyers who have chosen ARMs since 1981 have saved thousands of dollars. For a period, the percentage of home buyers applying for ARMs rose substantially, then buyers and homeowners began flocking to fixed-rate loans.
Whether to opt for a fixed or adjustable rate mortgage is a matter of
personal choice. The first route offers stable payments; the second
offers lower initial payments.
Another consideration is the length of time a buyer plans to own the
home. If you're planning on moving within three or four years, an ARM
makes sense even if rates do nothing but rise during that period of
time.
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