Have you ever been confused by a financial product?
First, a financial product could be a loan, investment, or insurance.
Back to the question; if you have ever been confused...it was probably a 'fancy' product.
Home loans such as 1,3,5,7-year ARMs (adjustable-rate-mortgage) are a great example of a 'fancy' loan. Let me bring you up to speed on an ARM; the rate is low and fixed for the first 1,3,5,7 years, then it goes adjustable to the current market rates. When the rates adjust after your fixed period, you better hope rates are lower or you are selling (which you still have to buy something else) or plan on forking out some extra cash every month, maybe as much as $500/month.
Some sophisticated investors can safely use an ARM, but don't assume you fall under my umbrella of 'sophisticated investors'. I personally used a fixed loan for my current home. Just ask yourself a very simple question: Can I guarantee that rates will be lower? Again, you can't use the 'I'm gonna sell in a few years' excuse. You still have to buy something else at the new rates and you can't guarantee what the housing market will do. And if you can only afford to buy the house with ARM rates, then you are buying too much house. You also can't assume that you will make more money in the future to make up for the increased payment after your rate adjusts.
So if it sounds fancy, you probably don't want to get mixed up with it...remember: you can't predict the future; so prepare accordingly!
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