I am in the middle of making these kinds of decisions and I would like to hear some imput from you all. I understand that with an open one, my rate will fluctuate and I could save some real money with the rates being so low right now. I also know that I would have no security as to what my payments are because they change. Closed can be great too because you know exactly what you are paying all the time and there are no suprises, however you usually end up paying more in interest. Can anyone offer any advise to me as to what you do or wish you would have done? Thanks.
I'm not a fan of adjustable mortgages... when we got our house in 1993, our payment was about $473....it never went down... always up... when we paid off the mortgage last year (refinanced) our payment was over $650 with a rate of 9.4%.... I'm not a math whiz or great at figuring out interest rates and that kind of thing, but the bottom line for us was that a variable rate sucked. I was only 22-23 when we bought the house, so I wasn't versed in credit stuff, rates, variable, fixed, etc...... but later found out our mortgage had an adjustable cap of 12%... our rate started at (I believe) 6ish%... I just followed the realtor and banker blindly.. didn't know any better, I figured they'd tell me what to do and they did, but it wasn't to my benefit......looking back I'm glad we haven't been paying rent all this time, but making the biggest purchase of your life at age 22-23, isn't all that smart either!.... unless you do your homework and have some basic credit knowledge. Ozzy.
Most adjustable rate mortgages have an annual cap as well as a maximum one. If you are planning to be in your home for more than 3-4 years it is probably better to get a fixed rate. If you pay extra $$ on a fixed rate mortgage you reduce the amount of years you pay.If you pay extra on an adjustable rate mortgage, you reduce the monthly payment.
Taffy, It all depends on how long you will staying in the house. Interest rates are very low now so if you would only be living in the home 5 years or less - an adjustable rate mortgage would probably save you alot (just make sure it is capped). If you will be living in the home more than five years I would consider a fixed rate (or closed) mortgage. Otherwise, you will always be worrying about the flutuation in the rate and how much your payment would be that month. Dani
We have a closed mortgage. The week after we closed the rates dropped like 2%. My parents had an open mortgage in the late 70's/early 80's. When the rates skyrocketed to around 26% their mortgage payment was over $6500CND. I was willing to risk possibly paying a bit more if the rates dropped by getting a closed mort. I was not willing to possibly lose my home by getting an open rate mortgage if the rates jumped. EX:for 25 years 125K @ 6.15%= $810/mth 125K @ 10% =$1118 15% =$1557 It is not likely the rates would jump that high, but you never know. The banks that approved me did not offer a rate cap on their open rate loans. Too risky for my tastes.
