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When’s the best time to select a fixed or variable mortgage?

January 15, 2011
By BOB JEFFRIES

Q: Bob, I have been reading your columns for the last 8 years. Thanks for the information that has been very helpful for my friends and myself.

I plan to buy a home in the near future. When should I decide on whether to select a fixed or a variable mortgage?

- Mary L.

A: Actually, this should be a last-minute decision. The financing market changes often enough so that the best financing mode one month may not be the best the next month. If you expect to live in a house a long time and you feel interest rates will increase, you may lean towards a fixed rate.

An equally sound case can be made for the lower initial interest rate offered by a variable rate mortgage. (First, do some leg work and shop around.)

If you don't expect to live in the home for a very long time, the variable rate mortgage would be the best answer. Deciding between a fixed or variable mortgage should naturally be a last-minute decision as this is being written (December 2010), the market is pretty bad the interest rates are still good. Just shop around, a good Realtor can help you find THAT lender that should have what you need.

Good luck!

I hope everyone had a very happy New Year. Even though it is long gone Ha! Ha!

Q: Bob, I have been reading your columns since 1990 and have enjoyed 99 percent of them. I greatly enjoyed Your article several months past (I think later part of 2010, sorry!) about real estate installments sales.

Am I correct in understanding installments sales can provide lifetime income? What if I sell my free and clear house, carry back the first mortgage for the buyer, but in a few years he decides to sell? What can I do to prevent this buyer from getting a new mortgage which will pay off my installment sale mortgage?

- B.M.

A: B, You are very astute. (What was the other 1 percent, no phone number and this will be printed in January?) The biggest worry most elderly installment sale home buyers have is the buyer, or a future buyer, will pay off the installment sale mortgage. This deprives you of the excellent retirement income you are counting upon.

When I receive notice one of my borrowers plans to pay off my mortgage, if I don't want to be paid off, I immediately contact the borrower to find out the situation. Usually, I can reduce the interest rate or talk the borrower out of paying off my installment sale mortgage. I'm sure you can do the same.

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Have a real estate question? Write, call, fax or e-mail:

Bob Jeffries, Realtor,

Century 21 Birchwood Realty, Inc.

4040 Del Prado Blvd., Cape Coral, Fla.

239-549-5724 Office

239-542-7760 Fax

bobjeffries4@juno.com

 
 
 

 

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