Fixed rates Archives - Stonebriar Mortgage

Should You Choose a Fixed or Adjustable Mortgage Rate During COVID-19?

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 15^th, “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.

Understanding Fixed-Rate Mortgages

A fixed-rate mortgage (FRM) comes with an interest rate that will not change during the loan. Obviously, this is a great option if you are worried about the economy and fluctuating interest rates. Conversely, if the market improves and interest rates fall, it will be much harder for you to change the terms of your loan and take advantage.

With all this in mind, what is one to do? Well, if you are planning to own the property or home for a while, the fixed-rate option may be ideal. Rates will fluctuate more the longer you stay. With an FRM, you will have a predictable monthly mortgage payment and rate. Regardless, you can decide to change the rate type or terms of the loan later, as long as you’re approved.

Selecting a 30-year Term for your Mortgage

Once you have chosen to get a fixed-rate instead of adjustable-rate mortgage, you have options on the number of years you have to pay the loan. Shorter loan terms may have higher monthly payments, but you will pay less interest over the life of the mortgage. Many people choose to have 30-year terms. This can result in better cash flow thanks to the lower monthly payment. Many experts foresee that the rates of 30-year fixed loans will remain steady.

Benefits of a 30-year Term Mortgage

You can write off interest paid on mortgages in your taxes. Some report that the deductions you’re able to get are higher with 30-year term mortgages. In addition, if you use the mortgage for a multifamily property, the improved cash flow will help you in times when residents cannot pay rent or must be evicted. Since there is a better debt service coverage, 30-year mortgages may have a better chance of getting approved than a shorter term. The loan will be amortized over a longer period, as well.

Stonebriar Mortgage helps many commercial investors in the Dallas, Texas and California markets succeed with their financial goals. Our expert staff are here to help answer any questions you have on 30-year term fixed-rate financing for homes and multifamily properties. Contact our team today!