Adjustable rate mortgages (ARMs) have interest rates that change over time. These rates typically start out quite low for 5 to 7 years (sometimes slightly more or less) and then go up over time as the market demands. They’re designed for short-term borrowers or those looking for very low up-front loan costs.
How does an Adjustable-rate Mortgage Work?
If you choose an adjustable rate loan, make sure your know the terms of your mortgage. Is there a cap on your interest rate? When and why would it change? If it does hit its cap, could you still afford it? In the event your rate does go out of budget, refinancing can be a great way to lower it, as well as your monthly payments. Check out Benefits of Refinancing to learn more about the refinancing process and when (and why) you might want to do it.
Pros and Cons of an Adjustable-rate Mortgage?
Is an Adjustable-rate Mortgage Right for You?
Adjustable-rate mortgages are excellent for homebuyers who:
• Plan to stay in their home only a few years
• Need low up-front monthly payments
• Want low interest rates at the outset of their loan
They’re not ideal for buyers who:
• Need to budget for their monthly mortgage payment
• Have unreliable or fluctuating income
• Plan to stay in their home for the long-term
• Want consistent, reliable rates and payments for the entirety of the loan
Are you considering an adjustable-rate mortgage for your home? Contact an Agora Lending loan officer today at (855) 466-7232 or start your application now.