The adjustable-rate mortgage (ARM) is a form of house loan in which the interest rate is subject to change. This loan is also known as “variable-rate mortgage” or “floating-mortgage”. It is a type of home loan in which the interest rate might fluctuate on a periodic basis depending on the performance of a particular benchmark index. This means that the amount you pay each month may increase or decrease. Keep in mind that adjustable-rate mortgages (ARMs) typically contain ceilings that regulate how much the interest rate or payments can grow each year or over the course of the loan’s term.
An adjustable-rate mortgage (ARM) has an interest rate that is typically lower than a fixed-rate mortgage, and the initial interest rate is fixed for a specified length of time. In the following months and years, the interest rate applied to the outstanding balance is modified periodically, usually annual or even monthly intervals.
An adjustable-rate mortgage (ARM) can be a wise financial decision for borrowers who plan to continue the loan for a limited amount of time and who are able to absorb any growths in the interest rate. If you plan on relocating or restructuring your mortgage within the first fixed-rate period, an ARM may be the best option for you to consider because you’ll be able to clear the ARM before increased interest rates take effect.
WHO CAN BENEFIT FROM AN ADJUSTABLE-RATE MORTGAGE?
The adjustable-rate mortgage (ARM) is particularly advantageous for people who move frequently or who are purchasing their first house. If you are not purchasing your permanent home, then purchasing property with an ARM and disposing of it before the fixed-rate period expires can result in a reduced monthly mortgage payment.
BENEFITS OF ADJUSTABLE-RATE MORTGAGE:
- LOW INITIAL INTEREST RATES – A lower first-month interest rate results in smaller loan payments and the possibility to pay more money toward the principal balance.
- INTEREST LIMIT – Interest rates cannot climb above the cap limit.
- FLEXIBILITY – If your circumstances will change over the next several years, such as if you plan to relocate or sell your home, an adjustable-rate mortgage may be an excellent solution for you. You can take advantage of the ARM’s set term and sell it before it expires and the less predictable variable phase begins.
- POTENTIAL DECREASE IN PAYMENTS – If interest rates decrease and the index upon which your ARM is benchmarked falls, it is possible that your monthly payment will decline as well.
Finding Your Lender
Employing the services of an educated and professional real estate agent to guide and support you through the entire process of securing a mortgage would be beneficial to your attempts to secure a mortgage on your property. In addition to providing you with exceptional services and assisting you with all necessary procedures, our team of expert realtors can also help you utilize and maximize all of your possible options and choose which is best for you. In case you have further questions or would like to learn more about our services, please do not hesitate to contact us!
Advantages of Adjustable-Rate Mortgage Loans
- Less risky than loans with higher rates
- Perfect if you plan to refinance or move out of the home in the future
- Lower payments in the early term
- Allows you to get more expensive loans than what you can get normally