Adjustable Rate Mortgages
If flexibility in your payments and lower rates up front are
appealing to you then an Adjustable Rate Mortgage is the choice
for you. Unlike fixed rate mortgages, your monthly payments
are at the mercy of the market. If the interest rate fluctuates
up and down, so do your payments. However, if you think that
the market is going to stay pretty steady for the length of
your mortgage this is a risk over which you may very well
An adjustable rate mortgage is not only good for those who
want to take a chance that their rates will go down, it is
also good for those who want a larger home, but can’t
afford the higher up front cost of a fixed rate mortgage.
With an adjustable rate mortgage, the introductory rate is
lower and fixed until that time period has expired. Via this
mortgage option, you can purchase a grander home at a fraction
of the cost.
Adjustable rate mortgages are also good for those who know
that their salary or household income will increase in the
near future. This allows you to afford the intro costs and
be confident that you can cover the monthly payments once
they rates become adjustable.
Similarly if you know you will be staying in the home for
a limited amount of time (usually less than seven years) an
Adjustable Rate Mortgage may be right for you. With an ARM,
the introductory period is generally anywhere from one to
seven-years, sometimes as high as ten, but usually within
the one to seven range.
If you sell your home before then, you have avoided paying
the adjusted rates and this is usually beneficial because
the introductory fixed rate is usually quite low.