Adjustable or Fixed – What’s the Best Mortgage Option?
March 12, 2021
Looking to purchase or refinance a home? We can help you choose the mortgage loan that best fits your budget and your unique needs. Let’s begin with the difference between an adjustable-rate mortgage (ARM) and a fixed-rate mortgage.
Adjustable: An adjustable-rate mortgage offers fixed payments for an initial period of time (typically 3, 5, 7, or 10 years), and the rate is adjusted thereafter based on the market—with adjustment caps in place for peace of mind. Since there’s no prepayment penalty at RCU, you can take advantage of the lower monthly payments an ARM offers to make additional principal payments.
Fixed: With a fixed-rate mortgage, the interest rate remains constant throughout the term of the loan. Most fixed-rate mortgages come with a term of 10, 15, 20, or 30 years. There’s no prepayment penalty, so you can choose to make extra payments, if you like, to reduce the principal balance of your loan.
Timing: On average, people refinance or move within the first 5-7 years of home ownership. If you think you may want to refinance or move within that time frame, the ARM will probably work well for you because you’ll benefit from the lower up-front interest rates. If you think you’ll stay in the home a long time, the fixed-rate mortgage may better suit you.
Stability: If you want your payments to remain the same for the life of the loan, the fixed-rate mortgage is your best option. Adjustable mortgages offer stability, too, with rate adjustments occurring only after fixed periods of time and at a life cap maximum for safety and peace of mind. If moderate adjustments don’t cause you stress, consider an ARM. (Keep in mind, not all adjustments are increases. If the market improves, your rate can actually go down!)
Credit score: If you have an excellent credit score, an ARM may allow you to take advantage of even lower rates.
One of your benefits as an RCU Member is that you have professionals in your corner, ready to discuss your needs. If you’re ready to apply for a mortgage or have RCU assist with your mortgage needs, visit our Home Loan Center or call 1 (800) 609-9009.
PPP Forgiveness Application Deadline
Congress passed The Economic Aid Act which changed the deferment period from 6 months post covered period to 10 months post covered period. For example, if your covered period ended June 30, 2021, under the new guidelines the earliest your first loan payment wouldn’t be due until April 2022, and you have until then to request forgiveness. Please use the following calculation to help you identify when your forgiveness will be due:
- PPP borrowers may select a covered period anywhere from 8 weeks to 24 weeks.
- RCU is automatically calculating your loan due date based on a 24-week covered period, if you intend on using a shorter covered period please inform us immediately as this will impact your due date.
- Your correct deadline will be reflected in your online banking account.
If all or part of your PPP loan is not forgiven, your first loan payment will be due the first of the following month after a decision is made by the SBA.
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