ARMs

1. The initial benefit of ARMs is a lower monthly payment compared to a fixed rate mortgage. Because the interest rate can change when overall rates fluctuate throughout the life of the loan, you start with a considerably lower interest rate than a fixed rate mortgage.
2. Because the interest rate is lower, you may qualify for a bigger loan which could expand your choices for a home.
3. If interest rates drop after your loan closes, you can take advantage of lower rates without having to refinance your loan. Depending on your loan, you could start to see a lower rate after one, six or twelve months.
4. ARMs can be transferred to a creditworthy buyer, if you have to sell your home during a period of extremely high interest rates like we saw in the early 1980s. This fact alone could add significant value to your home.

ARMs provide significant benefits, but they do carry some risks. Unfortunately, you cannot control interest rate movements. When federal and international interest rates rise, your interest rate will rise at some point, depending on the loan’s specifications. As your interest rate rises, your monthly payment rises and there in lies the risk of ARMs – potential higher monthly payments during the life of your loan. If your financial situation allows you leeway with potential change in your monthly payment, an adjustable rate mortgage could be right for you.

Contact Mortgage Financial and a loan officer will be happy to explain ARMs in greater detail.