The standard 30 year fixed mortgage for Fairfax VA homes for sale is the most common loan that most people are aware of. Moreover, they actually prefer it over an adjustable rate mortgage because they think they know the difference between the two and are scared of the latter. Actually, this fear stems from the variable nature of adjustable rates versus the solid and fixed rate.
Well, to give an expert opinion on that, very low interest rates such as 5% to 6% will generally favor going for the 30 year fixed mortgage because an adjustable rate mortgage won’t be comparably cheaper. A 30 year mortgage fixed at 5.5% will only be a little more expensive than an adjustable rate mortgage that starts at 4.5% to 5% but is fixed for the first 7 years. The difference is very minimal.
However, the real benefit comes when interest rates go up. For example, if interest rates go up to 8% to 8.5%, which is the historical average, on a 30 year fixed mortgage, then there will be five or seven year adjustable rate mortgages – meaning, they are fixed the first five or seven years and then adjust after that.
These adjustable rate programs will quite often be at 6% to 7% instead of at 8.5%, which creates a huge significance on a $200,000 loan. The difference in monthly payments could amount to $200 to $400, which, if you add up to the average duration of home ownership of 7 years, will actually save you $25,000!
Now, remember the very first homebuyer strategy presented here? What if you took the $25,000 in savings and used it to pre-pay the principal portions of your loan?
Then you’ll come out ahead even if the mortgage rate adjusts in the next few years. If the interest rate goes up, it will mean a lower loan amount of approximately $149,000 because you’ve paid it down by a lot with the money that was supposed to go to pure interest if you didn’t apply pre-payment.
This means that you need to consider adjustable rate programs if interest rates are at a more historical norm, because if you properly manage your mortgage, you’ll get a noticeably lower payment while paying down yourFairfax VA home much sooner.
Thierry is a Real Estate Agent at RE/MAX Premier, and Host of Talk Radio’s, “Inside Real Estate”
Thierry & his team Guarantee a $25,000 minimum savings for Northern VA Homebuyersby applying his unique insider techniques & strategies that he discovered throughout 8 years of exclusive Radio Interviews & Insider Access to wealthy Real Estate Insiders, Investors & Top Industry experts.
Phone: (703) 222-6714.
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