Adjustable
Rate Mortgage
The
adjustable rate mortgage, affectionately know as the ARM
is a mortgage with a rate that will adjust over time. You may be familiar
with the term three
year ARM, or five-year
ARM.
The
interest
rate on an ARM is dependent upon what the market is doing. If rates
are on the rise, than you can count on your interest rate going up. If
rates are going down than the opposite effect will take place, and you
can count on your rate going down.
Keep
in mind, this will leave you with a fluctuating mortgage
payment, so be prepared if you have to start paying extra on a monthly
basis.
An
ARM should be considered for a couple of reasons. By choosing a mortgage
with an ARM, you will start out with a lower interest rate, so you will
undoubtedly be saving a ton of cash on interest charges alone.
If
you are not planning to stay in your home for more than five years, you
may consider a three or five-year ARM. Once agin, you will save a ton
of cash on interest charges.
If
you are purchasing your home during a time when rates are high, by going
with an ARM, you will start out with a below market
rate, and if rates begin to decline, you can capitalize on them by
refinancing.
A
personal story . . .
When
I bought my first
house, I had only known my wife for less than three months. Had I
known than, that in three and a half years I would be married to her and
moving out of state, I would have taken a mortgage with a three-year
arm. To this day I still cringe every time I think of the money I
could have saved. But like they say, hind site is twenty twenty.
Fixed
Rate vs. Variable Rate Mortgages
Mortgage
Closing Costs
Interest
Only Loans
LIBOR
Mortgages
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