July 5th, 2014 11:01 AM by Joan Rusco
In most cases, experts say, plain-vanilla, fixed rate mortgages remain the best choice. —WSJ article “Picking the Right Mortgage”, July 5, 2014.
So many homeowners got caught in bad mortgages when the real estate bubble burst 6 years ago. There were interest-only mortgages, adjustable rate mortgages and piggy back mortgages to name a few. We’re starting to see banks return to some of these loan products.
Interest-only mortgages look great on the surface. They do lower monthly payments, but only for a while. Say you have a $100,000 mortgage at 5%. Interest only payments would be about $417. Many of these loans promise interest only for 10 years. Then the interest rate would adjust to current market conditions. Let’s say rates go up a mere 2% in that ten year period. You now have 20 years left to pay off the loan. Your payment would increase to about $716 overnight. An increase of 72%!
Adjustable rate loans can also be a good choice, for a while. Usually an adjustable rate loan will start at least 1% lower than a fixed rate. Then in 3, 5 or 7 years the rate will adjust to current market levels. Again, you might see a drastic increase in your monthly payment overnight.
Then there’s the plain-vanilla, fixed rate VA loan. Mortgage rates, although up a bit from a year ago, are still at historic lows. And when we at VALoansMN originate your mortgage that historic low rate lasts for 30 years. No surprises, no changes, just one predictable payment month after month.
We agree with the Wall Street Journal; In most cases, experts say, plain-vanilla, fix rate mortgages (your VALoansMN home mortgage!) remain the best choice! We’re here to help you get that “best choice”.