variable rate mortgage, affectionately know as Adjusatuble rate mortgage or 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
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.
in mind, this will leave you with a fluctuating mortgage
payment, so be prepared if you have to start paying extra on a monthly
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.
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.
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
Rate vs. Variable Rate Mortgages