Should You Get a Fixed Rate or Adjustable Rate Mortgage?

Just as with most questions regarding mortgages the answer would be it depends.  There are no set rules with this or anything else pertaining to financing.  Every borrower’s situation is different and that is why it is important to deal with someone who is going to guide in you the right direction, a Mortgage Consultant if you will. 

My personal opinion right now for most would be to get a 30 year fixed rate mortgage.  I say this because interest rates are so low.  Yes, they are lower on adjustable rate mortgages but I feel this economy is too unpredictable that who knows if you will truly pay it off before the rate adjusts.  Another point to add to that is why would you want to pay off a mortgage that you are financing in the 4 percents?  Make sure to max out your retirement first, payoff high interest rate credit cards, have a rainy day fund, etc.

I have a client right now who is trying to decide between a 15 year fixed and a 30 year fixed.  Interest rates are about .5% lower on 15 year fixed rates but if you take out a 30 year fixed rate you can amortize it over 15 years and make a 30 year payment should you need to.  If you take out a 15 year fixed you have to make that payment whether you want to or not.  I had a client who refinanced into a 15 year fixed rate 2 years ago, called me a year ago to refinance into a 30 year because he was worried about his job, and just as we started the refinance process he lost his job.  Now he is stuck with a 15 year fixed payment without a job.  It is sad and scary. 

This is just another reason as to why everything isn’t all about interest rates.  I don’t mean to beat a deadhorse but you can’t what you pay for in life and if you are getting financing from the cheapest person that is probably the type of advice you are going to get.