Looking for Flexibility – and the Lowest Possible Interest Rates?
In contrast to fixed rate mortgages, adjustable rate mortgages (ARMs) offer mortgage rates that adjust according to current market interest rates after an initial period at a low fixed rate.
The advantage to this type of mortgage is that the initial rates tend to be significantly lower than those of fixed rate loans, so you have the option to free up or save some money early in your loan term.
Here’s how ARMs typically work:
After the initial fixed period ends, your payments will drop as interest rates drop - or rise as interest rates rise.
Interest rate caps are available to help you set a limit on how high your interest rate can go, allowing you to feel more comfortable with your adjustable rate loan.
When you choose the length of your initial fixed period, you’re locking-in a low interest rate at that time. So, while interest rates aren’t 100% predictable and can either go up or down after that fixed rate period, you have the benefit of a low, predictable monthly payment for those first years of your mortgage. After that, your rate will vary from year to year, according to the market, but never higher than your cap.
Now, that you understand how an ARM works, you can start thinking about whether it’s an appropriate choice for you. An ARM might be suitable for you if:
You are comfortable with the knowledge that, after the initial period, your mortgage payment will likely vary from year to year.
You plan to stay in your home for only a few years, or plan to refinance in the near future.
If you think an ARM loan might be right for you, contact a Great Western Loan Officer. Your loan officer will consult with you regarding your specific lifestyle circumstances. We’ll explain to you all of the benefits and concerns to take into consideration as you weigh your mortgage options. We’ll ensure that you understand the different types of ARMs, how caps work, and how the different types of ARM loans might work for you.
For 30+ years, we’ve helped homeowners navigate the sometimes confusing road to the right mortgage. Let us help you discover the right mortgage for your needs.