An adjustable rate mortgage (ARM) is a mortgage that offers an introductory fixed rate for a limited period of time, then adjusts annually to reflect market conditions. This introductory rate is typically lower than a 30-year fixed rate. This can make ARM’s attractive options for the right buyer.
We all like to save money, but how can you tell if an adjustable rate mortgage is right for you?
Here are a few questions to ask yourself:
1. How long do you plan on living in the home?
If your answer is for less than 10 years an ARM may be a good option for you. Adjustable rate mortgages offer lower fixed rates for introductory periods ranging from three to 10 years. Ideally, you can take advantage of the lower interest rate and sell before the ARM adjusts for the first time.
2. Have another home to sell?
If you plan on selling another property to use those funds to pay off or significantly pay down your current mortgage than an ARM may be a good option for you. Again, the lower interest rate will allow you to take advantage of lower payments while you await the proceeds from the sale of your other property.
3. Anticipating your household income to rise in the future?
An ARM is a great loan product for households that anticipate their income to significantly rise in the foreseeable future. A few examples are a buyer currently in college that is about to graduate or a household where one member stays at home to raise a child but anticipates going back to work in a few years. The increase in income can provide the stability to weather any increases in payment once the introductory period ends and the ARM loan begins to adjust.
Other factors to consider when selecting an adjustable rate mortgage are current market conditions and your personal financial situation. Markets fluctuate daily and each buyer’s finances are different. Therefore, it’s important to review your specific options with a knowledgeable mortgage provider.
To learn more about different mortgage solutions to meet your needs visit amerisbank.com.
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