Adjustable-Rate Mortgages Facts

Adjustable-Rate Mortgages Facts

An adjustable-rate mortgage (ARM) has an interest rate that changes throughout the life of the loan. The interest rate may begin extremely low, but over time the rate could rise. Because of the predictability of monthly payments, a fixed rate mortgage (FRM) is an option that many homeowners choose instead.

Adjustable-Rate Mortgages Facts

The truth is that ARMs are good and bad depending on the borrower. An ARM is great if the homeowner wants to pay off their loans early. Another benefit of not having a monthly payment on your mortgage is it can save a lot of money. Borrowers who do not plan to live in their home for an extended period of time also have profit from an ARM.

California Home Loan Option- ARM

ARMs became popular in California in the 1980’s. ARMs were created when rates were in the double digits making FRMs very costly. If the market interest rates drop, mortgage rates and monthly payments can also decrease. ARMs are good when rates are high due to the potential for decrease in rates. When the market interest rates are low, it is more likely rates will rise than decline, so homebuyers are not likely to get an adjustable mortgage.

Right now interest rates are unstable. There are constant increases and decreases in the market rates. Remember that not all ARMS are bad, but be aware of the current economic status before choosing this mortgage option. For those who are still unsure, consider seeking professional assistant to find the right loan type for you.

By  Robert  Charlson

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