Adjustable Rate Mortgage
There are some situations where an Adjustable Rate Mortgage could prove very advantageous. Not only are these loans typically shorter in length, but they include a lower interest rate…for a while. You may have heard of a 5/1 or 10/1 ARM. We can help explain what that means and figure out if an Adjustable Rate Mortgage is right for you.
An Adjustable Rate mortgage does as the name suggests; it changes over time. Sometimes it changes due to fluctuation in the prevailing market interest rates like the Prime Interest Rate or LIBOR. Sometimes it changes according to a pre-determined schedule.
So since your mortgage rate and payment are subject to change over the life of the loan, so should work with your mortgage lender to plan accordingly.
Adjustable Rate Mortgage payments are heavily dependent upon time. Common loan lengths are 5 or 15 years and the monthly payment will likely be higher at the beginning than at the end. Depending on how it’s structured, the interest rate will be fixed for the first one to five years, at a rate lower than Fixed Interest Loans. As time goes on, however, the rate will adjust annually depending on the latest market rates. So if rates start going up, your mortgage will get more expensive.
Adjustable Rate Motgages are mostly used for short term buying situations so we can help you determine if it’s the right solution for you.
Keep Things Flexible
If you only plan to be in your home for a short period of time, or are comfortable with a changing rate, an Adjustable Rate Mortgage may be right for you.