People every day see astonishingly low mortgage rates in the newspapers. They all ask the same question -- are these real? Usually the advertisements in question are what are known as adjustable-rate mortgage payments.
Adjustable-rate mortgage payments work like this. They will typically offer an extremely low introductory rate to entice you to sign up for the loan. However, these low rates will only be temporary. Eventually, the rates will be adjusted on a regular basis, and will either increase or decrease over time. This means that every month you're going to be paying a different rate on your mortgage.
The downside to adjustable-rate mortgage payments is that you don't necessarily know how much your future monthly payments will be. This makes it harder to budget. There will be some types of adjustable-rate mortgage loans that will be limited in interest-rate increases. In this case, once they reach a certain percentage, the interest rate will no longer increase.
Is an adjustable-rate mortgage payment right for you? It all depends on your financial situation and the type of adjustable-rate mortgage payment you plan on making. They are a bit more riskier in the long run because of the dynamics of interest rates, so it is not certain whether it will be better than a fixed rate mortgage payment.
The one advantage that adjustable-rate mortgage payments have over fixed mortgage payments as that typically the introductory rate will be lower. This means that if you're currently on a budget, but in the future project that you will have more disposable income, then they very well may be the right way to go.
Just remember that when you deal with adjustment rate mortgage payments, there are no guarantees. When the interest rates go up, your payment will rise.
