A discounted mortgage rate occurs on an adjustable rate mortgage. This is a type of loan where the bank continues the teaser rate offered on an ARM beyond the typical period allowed. This agreement allows the home owner to save money on interest rates. Unfortunately, a discounted mortgage rate is not always a good deal.
Because discounted mortgage rates are given on an adjustable rate loan, it is subject to the same strengths and weaknesses of the larger loan. When the contract periods run out, a person may not know what his rate will be.
A Discounted Mortgage Rate Is A Good Deal – Compared To A Normal ARM Loan
Discounted rate mortgages will cost slightly less, over the life of the loan, than a normal adjustable rate mortgage, but they are not a good deal when compared to a fixed rate loan, especially since the rates are currently the lowest they have been since 1971. A borrower can calculate the exact amount he will pay back when he makes the last payment on his mortgage.
Adjustable rate mortgage amounts are unpredictable. Sometimes, a person will pay less than a person with a fixed rate mortgage would, although this is an extremely uncommon outcome.
When Should I Get a Discounted Mortgage Rate?
Discounted mortgage rates are a good deal for a person who plans to own a home for a short period of time. The options works best for a person engaging in house flipping or as a short term dwelling. A home owner who wants to stay in his home for a much longer period of time should take out a fixed-rate mortgage to make sure he gets the best possible deal when buying a new home.
The circumstances under which a person should consider this type of home mortgage loan are extremely limited.
Related posts:
- Should I Refinance Into A Fixed Rate Mortgage Or Adjustable Rate?
- What Is A 1/1 Adjustable Mortgage Rate?
- Is It Possible To Buy Down An Adjustable Rate Loan?
View full mortgage loans post on US Mortgage Rates
Tags: adjustable rate loan, fixed rate loan, person
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