loan insurance - do you need it?

When you borrow money from a financial lending institution, there are many times in which you will be offered insurance to protect the debt. This insurance can provide coverage in the event of your death, if you get injured and cannot work or if you suffer from an illness or injury that leaves you disabled and no longer able to work. Is this insurance policy worth the money that you are asked to pay for it? What are the chances that you will actually use such a policy? This blog will show you all about loan insurance to help you determine if it is an investment or a waste of your money.

2 Situations When An Adjustable Rate Mortgage Would Be A Great Option

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When you begin looking at mortgage loans, you may notice that adjustable rate mortgages (ARMs) have lower interest rates than fixed rate mortgages. This is primarily because ARMs are riskier than fixed-rate mortgages, but there are two good situations in which getting an ARM might be a better option for you than a loan with a fixed rate.

When you plan on moving before the rate would change

The first situation when an ARM might be a great option is if you plan on living in the house for a short period of time. Most ARMs have locked in rates for 5 years and then are subject to change every year after that. Some, however, have locked-in rates for 7 or 10 years.

If you get an ARM with a locked-in rate for a longer period of time than you plan on staying in your home, you will be safe. You will not have to worry about what will happen to the interest rate on the home after the time frame is up, because you will no longer be living in the house. The nice part is that you will have lower payments on the house while you are living there.

When you have a lot of debt you want to repay

The second situation in which getting an ARM might be more beneficial for you is if you have a lot of debt and want to be able to pay it off relatively quickly. If you choose an ARM and have a lower interest rate, your monthly house payment will be less. Because of this, you will have more cash freed up in your budget to use for repaying the debts you owe.

If you choose an ARM for this reason, you should try to do everything you can to pay off your debt within the period before the rate changes. Once it changes, you may end up with a higher interest rate, which will result in a higher house payment.

In addition, you may want to work on improving your credit score during this time. With a great credit score, you may be able to refinance your home loan when your low rate expires, and this may help you qualify for a lower rate on a fixed-rate mortgage.

As you begin looking for the right mortgage, make sure you look into both types to find out which would be better for you. To learn more, contact a mortgage loan lender such as Marty Fekete today.

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4 July 2016