What is a disadvantage of an adjustable rate mortgage compared to a fixed rate mortgage?
Answers:
Lock in today? I wouldn't lock a rate beside the current rate market. Rates have be going down consistently over the past week or so because of the announced plans to subsidize the market surrounded by favor of making the rates go down even further. I bet tomorrow we see rates drop as much as a .25 points just from the end announcement made today. I would float your rate until a day or so before closing within the current climate.
You don't know how high your rate may go, and the nest egg in today's market do not claim the risk. Odds are you would have to refinance into a fixed rate mortgage later anyway, so you might as resourcefully just take the fixed rate. Also, rates are historically, so you might as capably lock it in today. Source(s): AZ Realtor
As people have be finding out, the problem with an adjustable rate is that when the economy drops (as it is now) and the mortgage companies/banks adjust their percentage upward to compensate for their other losses, your mortgage rate increases road out of control to the point where you cannot afford your monthly payments anymore. Yea, when the reduction is good, your rate drops but there's no guarantee when that will be or if it will stay low. If you shop around you'll be able to find a pretty accurate fixed rate, and then if the rates drop lower, you can always refinance to a lower rate (especially at the present time when banks would prefer to lower their rate then hold another homeowner default).
Adjustable rate can cause the payment to move about up a lot. Fixed, the payment is set for the entire residence. I have owned several homes in the closing 40 years and never bought or refinanced with an adjustable rate. They seem to other go up, never down.
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