Is an adjustable rate mortgage a good idea?



Is an adjustable rate mortgage a good idea?

That’s a fair question, and a good one. Adjustable rate mortgages can be a good choice for borrowers who anticipate financing a property for a relatively short period of time, say three to five years. ARMs can offer lower, “teaser” rates that are usually lower than fixed mortgage rates.

What are the dangers of adjustable rate mortgages?

An adjustable-rate mortgage, or ARM, on the other hand … While you might save money initially with an ARM, you’ll bear the risk of your mortgage’s interest rate climbing over time. Once that happens, your monthly payments could become more expensive …

When should you consider an adjustable rate mortgage?

Obtaining an adjustable rate mortgage, knowing you’ll be moving within a few years, could save you money due to the lower interest rates. A lower house payment, if only for a year, can be beneficial. It’s not uncommon to pay a few hundred dollars less per month during your initial year(s) of an ARM, compared to a fixed-rate loan.

Should you consider an adjustable rate mortgage?

If you know that you are only planning on living in a property for a short period of time (1-10 years) then the benefits of getting an adjustable rate mortgage are enhanced. You can enjoy the interest and payment benefits with less of the risk. Ask your lender to help you crunch the numbers.