Fixed vs variable mortgage

holcombe3February 1, 2013

Okay, I am really stressing over our loan decisions. We are getting a 550,000 loan for a new home construction. We planned on using our land as collateral so dont have quite the full 20% saved up. So in order for us to lock in our interest rate for 30 years, it would have to be sold to a mortgage company and the mortgage companies do require the 20% down, they wont accept land. So our other option presented to us was an ARM 5/5. Im going to talk with this lender tomorrow to see what the caps are. Am I crazy for even considering this route with interest rates so low? It would probably take us another year to save up the rest of the 20% down so interest rates may not be that low in a year. The thing that looks appealing to us with the ARM is the first 5 years interest rate is 3.25% and I could make double payments on this amount. So should I take the gamble of the ARM or wait it out another year to lock in a fixed rate?

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ncrealestateguy

Shop around more lenders. I would think that if the land is worthmore than the 20%, that some lender would be ok with it.
These interest rates have nowhere to go but up. And once they do, they will go up quickly, IMO. I will ask around in my circles to see of lenders are still acepting land as a DP. How much equity do you have in your land and how do you know this?

    Bookmark   February 1, 2013 at 2:55PM
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brickeyee

Get a mortgage broker.

Lenders can only offer you what THEY have for sale.

A broker has access to multiple lenders.

    Bookmark   February 1, 2013 at 3:52PM
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ncrealestateguy

OP... one of the mortgage brokers that I use often tell me that most lenders will accept the equity on an owner's land for a construction to permanent loan.
I suggest dropping your current lender and moving on to another one.

    Bookmark   February 2, 2013 at 8:04AM
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