Rocklin is a nice, middle-class community near Sacramento, California. The Sacramento area is one of the nicest places in the country to live, with near-perfect weather, a comfortable climate and plenty of outdoor recreation. If you live in Rocklin, you have all the advantages of a big city nearby, without living there. You have less traffic, almost no crime, and beautiful neighborhoods.
Rocklin has a nice balance of families, couples and single adults. Most people are home owners, and the homes are newer than in most areas of California. The economy is good, with low unemployment and more jobs being created all the time. An unusually large percentage of the Rocklin residents are self-employed and work from home.
Whether you are buying, refinancing or taking out a home equity loan, you are looking for a mortgage, and a mortgage lender. Because of the rapid changes in the housing market over the past few years, there are more mortgage products available than ever before. They are all variations of the old fixed rate and adjustable rate mortgages, though.
Fixed Rate Mortgages
Most home loans are fixed rate mortgages, and they are the oldest and simplest type of home loan. When you did interest problems in Middle School Math, you were working with fixed rate loans. (Remember? Interest = principal X rate X time? It’s still a useful formula.) Fixed rate mortgages are safe and predictable.
The only way you can lose money with a fixed rate mortgage is if interest rates drop in the future, and you will probably be able to refinance if that happens. Right now, a lot of people are refinancing to convert their adjustable rate mortgages to fixed rate loans so that they are not affected if interest rates continue to rise.
The interest rate on a fixed loan mortgage is usually higher than the initial interest on an adjustable rate mortgage, but it won’t ever increase. The interest on an ARM will almost certainly go up after the initial period, and could continue to climb after that.
The only variables on a fixed rate mortgage are the interest rate and the term, or length, of the loan. Sometimes you can get a lower interest rate by taking a shorter loan term. You will usually find the lowest interest rates on balloon loans, which must be paid off in five years, and the highest on 50-year mortgages.
Adjustable Rate Mortgages
There are many variables with an adjustable rate mortgage, and they are not as simple to calculate and compare because the interest rate changes, and you can’t always predict what it will do.
A standard ARM usually has a lower interest rate than a fixed rate loan for the first five to ten years of the loan term, and then it begins to adjust. Your contract will define how often it adjusts, but once a year is most common. The rate of the first adjustment may also be defined in your contract, but after that it will probably be indexed. The index is some standard that the lender uses to calculate interest rates. The prime rate and treasury bond rates are frequently used indexes. Your new interest rate will be equal to the index plus a margin, which is the lender’s profit.
You will notice that, even with a standard ARM, there is room for negotiation. You can negotiate the initial and adjusted interest rates, the term of the loan, the amount of the margin and even what index the lender uses. A lender probably will not change the index he uses for you, but you can find a lender who uses one that you prefer.
You can start the search for a lender right here by completing the form on this page.
