Regardless of how appealing the alternative may seem, a fixed mortgage is always going to be your best choice. (Unnamed Copywriting)

Regardless of how appealing the alternative may seem, a fixed mortgage is always going to be your best choice.

They aren’t around as much as they once were, but adjustable rate mortgages are still available, and can still be quite tempting. Even when the rates on fixed rates mortgages are as low as 5 percent, it can be very tempting to instead opt for the 3 year adjustable rate because of its initial rate of 4 percent even.

The problem, as we have seen unfolding throughout our economy around us, is that at some point that initial fixed rate is going to expire and your mortgage is going to become a fully adjustable rate. The initial idea with these loans was that they were going to be a short term loan. The industry standard used to be that within the initial 5 years of a mortgage, about 90 percent of people would sell, refinance, or pay the home off. So, assuming that your house continued to increase in value, it didn’t make much sense to get a fixed rate mortgage.

But, like is happening now, if your home’s value does not continue to increase, or even worse, if it begins to decrease, it is going to become very difficult to refinance out of that adjustable rate, and your interest rate will skyrocket.

There are a lot of schools of thought out there now that say that fixed mortgages are still a bad idea, especially in this economy. The argument is that the home prices have fallen far enough that the average homeowner does not stand to lose any more value, and should be looking forward to a rapid increase in value. The problem here is that there is simply no way to know for sure. If things do get worse, someone who has opted to forgo the best fixed rate mortgage for an adjustable rate mortgage will likely find themselves facing a very dire situation.

When fixed mortgage rates are as low as they are today, there really is no excuse for borrowers not to opt for the best fixed rate mortgages they can. The difference in monthly payment, while there, is still very miniscule. It simply is not worth the $20 to $30 dollars a month that you can save to potentially lose your home in three years when the rate expires.

Even bad credit mortgage lenders are currently offering thirty year fixed rates for right around 6 percent, so it doesn’t even make sense for people with bad credit. Mortgage lending isn’t like it used to be, when your interest rate was directly determined by your credit score. Everyone above a 620 credit score ends up with the same interest rate and everyone below has the same as well. And, unlike it was in the past few years, the people with the worse credit aren’t getting rates that are all that much higher.

If you are thinking about refinancing or about purchasing your home, you really need to put a lot of thought into what you’re doing before you turn to an adjustable rate. There is simply no way to get around the fact that you will always be better suited in a fixed rate.