The “ right ways” to use an Adjustable Rate Mortgage
Adjustable-rate mortgages, or ARMs, have an interest rate and monthly payment that fluctuate. Most ARMs
have a non-changing interest rate during the initial rate adjustment period, which can be as short as a month or
as long as 10 years. After this period, the rate generally fluctuates periodically for the life of the loan. During
this initial adjustment period, the rate is generally lower than those on comparable fixed-rate mortgages. This is
what makes ARMs an attractive and good option for borrowers.
An ARM is a good option if you plan on buying a home as a short-term investment, or if you don’t plan on
owning a home for more than five years. Choosing an ARM is most effective for homeowners who plan to
sell their home before the initial rate adjustment period ends. This initial period is when the rate is typically
the lowest. At that time, the interest rate becomes variable, or adjustable, and the homeowner would likely
refinance into another ARM, a fixed rate or sell the home outright.
An ARM is a good option if you plan on refinancing your existing home loan. During the initial rate
adjustment period, the rate of an ARM may be lower than a fixed rate. Those who take advantage of this
benefit pay the loan principal down quicker which shortens the term of the loan, pays your loan off quicker
and saves money that you would have otherwise paid in interest.
An ARM is a good option to manage the flow of your monthly income in a high rate environment. The
people who may benefit from ARMs today aren’t looking for ways to purchase a house they otherwise
wouldn’t be able to afford. Setting aside the savings during the ARM’s initial rate adjustment period while
the payments are lower will allow you to make the higher payments that occur after the initial rate
adjustment period. After the initial rate adjustment period both the rate and your payments can increase.
An ARM is a good option if you are nearing retirement. You can take advantage of the lower mortgage
payment during the initial rate adjustment period and save your money to prepare for retirement. Once
you’re retired and your income is lower, you won’t have to worry about paying a higher mortgage payment.
An ARM is a good option if you are building equity quicker by making extra principal payments. Having a
lower adjustable rate mortgage payment during the initial rate adjustment period will allow you to make
extra payments on the loan principal, which in turn builds more equity in your home.
An ARM is a good option if you want to save money over the life of your loan. You have the potential to
lower the amount of overall interest over the term of the loan. If you take advantage of the lower mortgage
payment during the initial rate adjustment period and make extra payments on the principal, you will reduce
the loan amount upon which interest is charged. This saves you money at the end of your loan term that
otherwise would have gone toward interest.
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and apply for your Adjustable Rate Mortgage today!