ARM/REFI
Adjustable Rate Mortgage/Refinancing Options
A different kind of option that could be a perfect fit for you...
ARM/REFINANCE
What benefits do adjustable-rate mortgages offer?
Adjustable-rate mortgages have advantages.
Home loans with a variable interest rate are known as adjustable-rate mortgages (ARMs). Adjustable-rate mortgage rates fluctuate in line with general interest rates. These loans can be helpful for purchasing a home, but they also carry risk.
Early in the loan period, payments are lower and rates are lower. People can purchase more costly homes than they otherwise might since lenders can take the reduced payment into account when determining the eligibility of borrowers. Borrowers can benefit from at or below market rates without refinancing.
Risks Associated with Adjustable-Rate Mortgages
There are no free meals, alas. Despite the possibility that you will pay less, you still run the danger of having your rates increase. Your monthly payment can sharply rise if that happens. When you have an adjustable-rate mortgage, a payment that was once manageable can turn into a major hardship. The payment may become so expensive that you are forced to make a late payment.
Example ARMs
There are numerous ARM mortgage flavors to choose from. You might discover the following, for instance:
Mortgage with a 10/1 ARM: The rate is set for 10 years, after which it changes annually (up to the cap, if there is one)
Mortgage with a 7/1 ARM: The rate is set for 7 years, after which it changes annually (up to the cap, if there is one)
Mortgage with a 1-Year ARM: The rate is fixed for a year, then it adjusts annually, subject to any caps.
There is an additional choice called a 5/1 ARM. Ask your licensed specialist which choice is right for you.
Some caps are better than others.
Be aware that caps may change throughout the term of your loan. The first modification may be up to 5%, and any further adjustments may not exceed 1%. When the first reset comes around on an adjustable-rate mortgage you're thinking about, be ready for a possible swing in your monthly payments.
Still need help?
If you still have questions, click on Apply Now below and leave your name and contact information for callback or click on Live Chat and stay online for live assistance.