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San Mateo mortgage – how do you decide between a fixed and adjustable rate mortgage?

While 50 years ago it may have been possible to purchase a home outright using cash, many of us will have to take out a San Mateo mortgage loan in order to purchase a property.  The difference between what you can pay now as a downpayment and what you need to pay in the future in order to make up this gap is called a mortgage.  To give you a hypothetical, if you put $10,000 down on $100,000 property, you will need a San Mateo mortgage for $90,000.

It should come as no surprise that a San Mateo bank is going to charge you for this privilege.  Interest charges are set percentage fees or variable fees that will be charged on top of the mortgage note in order to cover the risk that the lender obtains as the result of underwriting your loan.

Since these interest payments on a San Mateo mortgage can add up significantly over time, it is of prime importance to do plenty of research on APR.  It is not uncommon for some individuals to end up spending double what they pay for their home in interest alone.  

So when trying to decide between a fixed rate or adjustable rate home mortgage, how do you make the decision?

Fixed rate San Mateo mortgages involve set monthly payments which will not change over the lifetime of your loan, which offer you better protection against the potential for skyrocketing interest rates.  Adjustable rate mortgages on the other hand will reset to a higher interest rate after a certain period of time, and your monthly payments will be variable.

Many people have found themselves in desperate financial straits as a result of selecting a lower rate adjustable San Mateo home loan, when their monthly payments increase.  While a fixed rate mortgage may be more expensive up front, it is usually the safest option.

You should stay away from more exotic loans such as interest only San Mateo mortgages, which involve simply paying the interest on the loan as opposed to principle, which means the initial payments will be interest, and then the principle will begin a few years down the road.  These increases in monthly San Mateo mortgage fees are excessive, and they can be as high as 50% are more after a few years.

Another type of exotic loan that you may wish to stay away from is called an intermediate adjustable rate mortgage, which will start out at a fixed rate for a few years and then change to adjustable.

With so many different choices I hope for the short guide has narrowed down your selection for the type of San Mateo mortgage that you wish to acquire.  Always do plenty of research as spending a little bit of time now will go a long way for the happy financial future.

To learn more about San Mateo Real Estate take a look at my San Mateo home Inspection site

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