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Variable Rate Mortgage

Variable Rate Mortgage

The 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 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.

Fixed Rate vs. Variable Rate Mortgages

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Books about ARM loans:

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