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General Real Estate Investing

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John Stevenson
  • Foreclosure Specialist
  • Miami Beach, FL
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131
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Stay away from adjustable rate mortgages.

John Stevenson
  • Foreclosure Specialist
  • Miami Beach, FL
Posted Oct 2 2012, 21:44

Investing is about leverage. Leverage is about stability. If the rate on the loan adjusts annually, you can be pretty sure the rate will adjust up. Take a look at how just two percentage points can change your payment:

Loan $165,000 Rate: 3.5% Term: 30 years PAYMENT: $740.92
Loan $165,000 Rate: 4.0% Term: 30 years PAYMENT: $787.74
Loan $165,000 Rate: 5.5% Term: 30 years PAYMENT: $936.85

You would be better off locking in a rate on a 15 or 30 year mortgage rather than having the worries that as interest rates increase your return decreases.

To see if a HELOC will be better, make sure you calculate how much interest your will pay on this loan (higher interest rate + fluctuating) over lets say 5 years compared with a traditional 15 or 30 year mortgage.

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