How Often Do People Get Fixed Rate Mortgages That Terminate After A Certain Period?
remember the period of 2003 people got their fix rate mortgages from their adjustable rate mortgages…and wanted to know how common it is for some during this period got fix rate mortgages which were for only a specific length of time ??
why would anyone only get a low fixed rate for a specific length of time??
what are the advantages?
Thanks for your answers!
Not sure exactly what your question is.
A mortgage that starts off fixed, then turns variable is an adjustable rate mortgage (ARM). The rate might be fixed anywhere from 6 months to 5 years. Then it’ll adjust, and keep adjusting.
A mortgage that starts off low and then adjusts to a higher rate is a buy-down mortgage. You can pay extra points to reduce the interest rate for a period of time (6 months to 3 years). Then it’ll adjust upward to a set rate. For instance, you might have a 6% rate with a 2/1 buydown. First year, your rate would be 4%; second year your rate would be 5%; third year and thereafter your rate would be 6%. That’s really a fixed rate, with an up-front buydown.
In both cases, people would get such rates because they may not yet qualify for the higher rate, but they expect their income to go up in a year or two. The lower up-front rate allows them to get a lower rate that they’ll qualify for.
Hope that helps.
It’s a fixed period/adjustable rate loan. They come in 3,5,7, and 10 years fixed periods. The reason why people get these types of loans is because during the fixed period, the payment is only on the interest and is lower than if you had a 30 year fixed rate loan where you’d pay for both the principle and the interest.
The reason why you would not want to get this type of loan is that you probably cannot afford the monthly payment after the loan adjusts and you may loose your home due to foreclosure if you do not refinance before the adjustment date.
There is, or a least was, a type of mortgage with a “balloon payment” after a certain length of time – maybe fixed for 5 years, then the entire balance due or you had to refinance. That would appeal to someone who was pretty sure they’d sell the house within that time.
only at the beginning you can get a fixed rate for certain time then it will varibale, read your mortgage contract or check with your bank and if you pay a lot talk to them as the interest is going down now.