Some Warnings When Applying for a Mortgage
When you apply for a mortgage, you will be signing a contract with the lending company. This contract will include your willingness to pay for a certain amount every single month for as long as the term that had been agreed upon. Most terms last up to thirty years. This means, that you need to pay every month for the mortgage until the term reaches its maturation.
There are two kinds of loans which are normally associated with mortgages in real estate properties. The adjustable rate and the fixed rate. The adjustable rate simply means that every month, depending on the value of the interest, the amount that you pay will fluctuate. In the months that the rate is low, you the borrower are on the winning end, if it increases, then you the borrower will be on the losing end. Whatever the rate, you will have to pay. The fixed rate is different: you will pay the same amount every month until the maturation date. This means, if you need to pay $3000 a month, then you will continue to do so for the next thirty years.
The warning comes in for those who are applying for the adjustable rates. You have to make sure that you can pay whatever the amount comes up every single month. So if you can only afford to pay, say $1200 in a month, and the interest rates increase considerably and you will be billed $2000 then you need to pay that amount, no questions asked.
The question is, can you afford to pay the amount that is not steady? Can you continue to pay if the interest rates continue to go up to the highest rate? If not, then it is better for you to go for a fixed rate, at least this way, you can make sure that you can make the exact same payments every month for however long it takes.