Properly named Adjustable Rate Mortgage.
|Broken down to basics, all mortgages fall into one of two categories of financing: fixed interest rate and adjustable interest rate, or ARM. Each has its pros and cons, benefits it confers upon the buyer and some ways in which it may not be right for all buyers.
While many people are currently opting for fixed-rate loans, ARMs can be extremely beneficial for many homebuyers.
W.J. Bradley offers a variety of adjustable-rate mortgages (ARMs). But why would you want to take a chance with an interest rate that fluctuates? It’s important that you understand what an ARM is and its characteristics before you commit to your new home financing. Below is some basic information about ARMs to get you started:
- Lower starting costs
- Lower starting rate than fixed-rate loans
- Often easier to qualify for since rates and initial payments are lower
- When interest rates are low, your mortgage rate is low — but keep in mind, if rates rise, so can your ARM interest rate, at set intervals
- All ARMs have caps that prevent the rate from going over a certain amount; some are periodic (every six months or so), some are lifetime caps (the percentage that, when added to the start rate, tells you how high your interest rate can rise over the life of the loan)
- Some programs start out with a fixed-rate period; if rates have risen when this period is over, you can choose to look for a better rate and refinance, or sell your home
- Interest-only ARMs are available, and can be a good choice for borrowers who plan to spend a short amount of time in the home, such as first time home buyers who may plan to trade up in a few years.
If you’re looking for smaller monthly payments and lower qualifying requirements, if you plan to be in your home for a short time or if you need to keep more cash in your pocket for the near future, an ARM may be just what you’re looking for! It’s important that you speak with a licensed mortgage professional who can explain the pros and cons to determine if an ARM loan is right for your unique financial situation.