Which is better: a fixed rate loan or a variable rate loan?
Answers
3127 points
EthanR answered 3 months ago …
The answer depends upon your individual circumstances. If you are going to live in the home for longer than five years, then I would say go with a fixed rate loan. But if you are only planning on living in the home for 2-3 years, then you might be able to find a 3/1 ARM or a 5/1 ARM with a better interest rate. But be careful because sometimes plans change and then you can be stuck with an ARM that has a higher interest rate, unless you spend a couple of grand to refinance.
Ask your mortgage person to run an amortization schedule for you on a few different ARM's, as well as a fixed loan, so you can see what the difference will be in principal and interest payments for the term you choose.
951 points
Grudun answered 3 months ago …
My recomendation is a fixed rate loan because it gives you the most flexibility. If you are only planning on staying in a home for a few years it gives you the opportunity to be able to rent or lease option your home when you move out allowing for additional gains(with tax advantages) and it protects you from the significant upside potential in interest rates which are likely be a factor in making homes less affordable in the future.
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