Fixed or Variable Mortgage: The ONE Thing To Know (2018)

Fixed or Variable Mortgage: The ONE Thing To Know (2018). Best Mortgage Deals UK Episode 73

Fixed or Variable Mortgage: The ONE Thing To Know (2018) video duration 20 Minute(s) 34 Second(s), published by Heritage Wealth Planning on 11 03 2018 - 10:36:19.

Should you choose a Fixed-rate mortgage or an Adjustable-rate mortgage (ARM)? This completely depends on how long you think you'll be in your home Welcome to Mortgage Broker TV and be sure to SUBSCRIBE: http://bit.ly/followbenparry to learn more about the latest mortgage deals and learn some insider .

Croydon has most high-risk mortgage lending Croydon has most high-risk mortgage lending Croydon is the UK's number one hotspot for high-risk mortgage Welcome to Mortgage Broker TV be sure to SUBSCRIBE: http://bit.ly/barrfinancial to learn more about the latest mortgage deals and learn some insider property Welcome to Mortgage Broker TV and be sure to SUBSCRIBE: http://bit.ly/followbenparry to learn more about the latest mortgage deals and learn some insider .

Should you choose a Fixed-rate mortgage or an Adjustable-rate mortgage (ARM)?

This completely depends on how long you think you'll be in your home.

If you believe you'll be in your home less than 5 years, a Variable-Rate mortgage can make sense.

In this video, we model the difference from a cash-flow and net-worth perspective of Brenda and Kevin, our fictional couple from my book Strategic Money Planning: 8 Ways To Get Your Financial House In Order.

Brenda and Kevin started out with a fixed rate mortgage when they bought their first home, a starter home.

Times change, though, and a few years later, a job offer in a different state had them considering moving.

Only drawback was they had to sell their home.

Unfortunately, the real estate market turned against them (remember 2008?) and they were upside down on their mortgage. Being upside down means they owed more than the house was worth.

If they would have had cash available they might have been able to pay off the remaining balance from the sales price they were offering.

But because cash flow was so tight, they were unable to save and were unable to sell their home. Thus they had to decline the excellent job offer because they were stuck.

In hindsight, one of the reasons they had no cash available was because they took a higher interest, fixed-rate mortgage without considering what their future circumstances would be.

If they would have thought it through when they bought the house, they might have realized the likelihood of staying in their starter home for any significant time was probably quite low and planned accordingly.

A variable rate mortgage MAY have lowered their monthly payments AND reduced their principal mortgage balance at the same time, which I show in the video.

We use the Navy Federal Credit Union interest rates from August 2007 where a 3/1 ARM had an interest rate of 1.875% and a 30 year fixed mortgage had an interest rate of 3.75%.

We show the difference in payments and principal balances after 5 years with three scenarios: The Fixed Rate Mortgage scenario. The 3/1 year ARM with \