I have heard about Variable rate home loans. But why do people choose that loan over a fixed rate loan?

Could there be a baloon payment with that type of home loan?

Responses:

It depends. You need to take everything into consideration when taking out a loan. To me, variable or arm or interest only products are just like other loans, they have their purpose. You may know that military people move around a lot. When they're moving every 5 - 7 years, why not get a 7 year arm that they pay a fixed interest payment on every year? Why would they want to pay prinicple on something that they really do not have an emotional or investment attachment to? Maybe your just starting a family and want the extra money? Some people are money savvy and think that by playing the arm game that they can keep more money to themselves. Arm's / variable mortgage are not for everyone, that's where a mortgage professional comes in to understand the entire situation and customize a mortgage solution to not only fit immediate needs, but long term goals as well
There could be a balloon, but not necessarily. That's just another factor to consider, like a "prepayment penalty". The reason why people take Variable rates is fairly simple. The rate is initially "fixed", often for two years. All other things being equal, that initial interest rate is usually lower than what they could get with a 30 year fixed rate. The "plan" is to refinance before it goes up. Where people get caught is when they are unable to refinance after that time, whether because they did not fix their credit, or the interest rates went up so much that they can not afford the going rate, or the home value went down. I suspect that most of the foreclosures going on now are people that intended to refinance before the rates varied, but did not or couldn't. Anyone taking a variable rate now with such a plan is in for an upleasant surprise when they get to the part of the plan where they refinance at a fixed rate
This is a great site about home loans. ukhomeloan.org
Because they often start out less than fixed rate and it's a somewhat tricky way to fool people into taking a bigger loan than they can afford

Tags: year, purpose, attachment, investment, playing

Follow this dicussion..

Related Images:

Knowledge Base

I have heard about Variable rate home loans. But why do people choose that loan over a fixed rate loan?

could there be a baloon payment with that type of home loan?. because they often start out less than fixed rate and it's a somewhat tricky way to fool people into taking a bigger loan than they can afford. there could be a balloon, but not necessarily. that's just another (home mortgage loan)

Is it easier to get a home loan with bad credit if you have 20% to put down?

i own a home now, but want to move. my credit has gotten bad since my last home loan. i would have at least 20% to put down on a new loan, do you think i could find someone who would finance me? the credit problems i have now are (bad credit home loan)

Is it possible to get a home loan with bad credit?

my credit score is around 530 and my husbands is around 630. i have charge offs from 2005 that will be on my credit report until 2012 we both have good jobs and bring home around 7000 together each month. we also have around 30, 000 saved up for a (home loan rate)

Related Images:

Knowledge Base: Home Loan

Does anyone know any reputable bad credit home loan dealers?

my partner and i both have bad credit. we want to know if there are any reputable bad credit home loan dealers out there that will help us get a home loan with little to no deposit required. we are both employed full time but our finances are being eaten (home loan refinance)

It is a buyer's market - I understand that. Home equity loans, how do they work?

if i purchase a home for $300, 000, but it is appraised for $350, 000, will i have automatic built - in equity that i can use to consolidate $12, 000 in school loans and credit card debt? or, will i still have to pay down some of the p&i (home loan rate)

Home loan bad credit How to get it?

can any one help me out in getting home loan with bad credit. thanks in advance. recenlty my friend got home loan of 500000$ for 25 years on 1. 5% which should be paid annually my friend doesnt have good credit his credit score is below 500 but still he (home loan)

What Credit score do I need to get approved for a home loan refinance?

i am hoping to refinance my home loan to a lower rate. i understand that applying for a new loan is a "hard inquiry" that will lower my credit score, so i do not want to apply unless i am reasonably sure of being approved. what score range would i (home loan credit)

What would happen to your home mortgage loan in this case?

say if me and a co - buyer buy a home together both first - time home buyers, and get a conventional loan from a bank. if later, one of us wants to take our name down the le, would that be allowed? would the bank re - acess the (home mortgage loan)

Related Images:

Knowledge Base: Home Loan Rate

Does the home loan interest rate vary between online quotes and the real ones ?

- i am planning to buy a home - i have put an offer on a house and almost a hundred percent done deal now i have to look out for a home loan. i am looking at several online interest rate quotes what lenders are giving based on my (home loan rate)

What kind of home loan interest rate could I get with a bankruptcy on my record?

i have a chapter 7 bankruptcy on my record from 2003, but i have no debt and a credit score of about 700. and i have $20, 000 for a down payment. if i got a home loan, would the bankruptcy make a huge difference in the interest rate? how (home loan rate)

Can I lock a home loan rate with more than ONE lender ?

can i lock a home loan rate with more than one lender ? so is it good to go with a broker than a lender directly ? will i get a better rate from a broker than a lender directly ?. sure, but you will need to make formal loan (home loan rate)

I have heard about Variable rate home loans. But why do people choose that loan over a fixed rate loan?

What is the best way to get home loan rate quotes?

who is the best to get a home loan from? i am in oklahoma. start looking around, i think country wide is at the top of the list. find a lender in your area and get qualified to buy. i would float into a rate right now. local lender so (home loan rate)