April 2010 Vol. 5 No.4
• Fixed vs. Adjustable? Still a Pressing Question • April's Home Value Improver • About Us

Fixed vs. Adjustable? Still a Pressing Question

The 30-year fixed rate mortgage has historically been the gold standard of mortgages. It's probably the one your parents had over the life of their loan. However, today's homebuyer is more sophisticated - or confused - than the homebuyer of yesteryear. Nowadays, mortgages are sold as "products" and they can be dramatically different from each other.

Perhaps the biggest question for someone in choosing a mortgage, is "adjustable or fixed rate?" Adjustable rate mortgages (ARMs) got a bad rap when rates were climbing. People with ARMs panicked and rushed to refinance. Now that things have significantly settled in the mortgage world, people are taking a closer look at whether they want an adjustable- or fixed-rate mortgage.

Why Adjustable?

Adjustable rate mortgages do just what they say - adjust.
If the rates go down, your mortgage goes down, too. You don't have to have to pay closing costs to refinance to get that lower rate. Of course, if the rates go up, your mortgage payment will go up, too.

Short term stays.
If you are not planning to stay in your house for more than a few years, an ARM is a good choice, as you don't have to worry about the rates changing that much over a shorter period. If it's a short enough stay, you will be able to enjoy a low "teaser" rate for much of your payments.

You want your money elsewhere.
If you've got a great opportunity for your money to do really well somewhere else, and you want to put as little as possible into your mortgage, you can try an ARM. For every dollar you don't pay into your mortgage, you can put a dollar into an investment account or some other place you would like your money to reside.

You are comfortable with some unknowns.
If you are comfortable with the word "adjustable" when it comes to your money, an ARM is a good choice. Perhaps taking a gamble on the possibility that your mortgage payment will decrease sounds great to you.

Why a Fixed Rate?

What goes up may not always come down.
While an adjustable rate is great when rates are dropping, it is not so great when they are climbing. For borrowers who don't want to weather ups and downs in their payments, a fixed rate may be a better choice.

You plan to stay in your home for a long time. If you know you are staying put for a good long time, you may want to know what your payment is going to be for the duration.

You are risk-averse.
In a 30-year fixed loan, you know today what your mortgage payment will be in 2030. With an ARM, however, you don't know what it will be a year from now. For many, many people, this is a deal breaker. There is a cost associated with not knowing what your mortgage payment will be in 10 years, and that cost is impossible to predict. And while you can't predict how much you could save if you choose an ARM, you can predict what your mortgage will cost.

You prefer a straightforward program.
ARMs can often be confusing because there are several different types. If you do not want to have to dig too far into the details of your mortgage, an ARM is likely not right for you.

April's Home Value Improver

Six Easy Steps to Cleaning Out Your (yuck) Basement

If you are like many of my clients, your basement is not a pleasant place to be. Damp, dark, dank, and dusty are just four of the unpleasant descriptors that people share when I ask them about those scary places that sit below the kitchen and living room.

Sure, the super-organized have wonderful shelves with neatly labeled boxes for sports equipment, wholesale club supplies, and holiday decorations. But, for those of you in the I'll-get-to-it-another-day crowd, who shove random items here and there, the basement is a downright scary place.

An unopened wedding gift from the 90s peeks out above an old infant sun shade, which sits atop some dusty college textbooks, and you don't even know where to start. And while spring is not necessarily the time to spend your weekend hiding out in the basement, it's a good time to do your, well, spring cleaning!

Here are some tips to get you going.

  1. Give away to a charity.
    This is the pile for items such as that old wedding gift that has never been opened, and the infant sun shade, for that matter. The Vietnam Veterans and Big Brothers/Big Sisters will come and pick up clothing and household items.

  2. Give to a friend or family member.
    Think about what others around you need. Do you have a young relative who is setting up his first apartment? Might he like a set of glass coasters that your children would break inside a week? Maybe an older relative or neighbor can use Grandpa's cane.

  3. Go to the recycling center.
    Books, cardboard boxes, recyclable plastic, and sometimes clothing can go to your local transfer station/recycling center.

  4. Go to a hazardous waste disposal day.
    Paint, lighter fluid, and filled aerosol cans are among those items you can't just drop in your trash barrel. Most cities and towns, however, have household hazardous waste days where you can get rid of that old house paint once and for all!

  5. Put in the plain, old trash.
    A broken picture frame, a pile of old puzzle pieces, some broken office supplies, and other items (you know what they are) fall into the "no one would ever want" category, and can go right to the trash.

  6. Put in neat, organized storage.
    Of course, there are some things that do belong in the damp, dark basement. Holiday decorations, a stock of paper towels, ice skating equipment, and laundry supplies are some of those items that legitimately have a permanent home in the basement. A quick trip to Target for some clear storage bins will solve that organization problem.

Now that you have your categories, you need to find a day that you can spend rooting through the basement stuff. If dust really bothers you, putting on a surgical-type mask may make the task a bit more pleasant. Good luck!

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My husband, Kevin, is running the Boston Marathon this week. Every year, this event makes me think about how preparing to succeed in this 26.2 mile race is much like preparing to succeed in your financial life.

For every individual runner in the marathon, there is a unique personal goal. For every person planning their finances, there is a unique goal. The key to success is to set the goals that matter to you, to do the work you need to do, and to seek the support and resources you need to assist you.

You may not be ready to run a marathon, but you definitely can be ready to achieve your financial goals. I'm always happy to take your calls and emails regarding home buying or refinancing.

Best regards,
Debbie Siegel
Westchester Mortgage

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