An adjustable-rate mortgage (ARM) is a type of home loan with an interest rate that can change over time. The interest rate on an ARM is usually fixed for a certain period of time, called the introductory period, and then it can adjust up or down periodically, based on an index rate.
ARMs typically have lower interest rates than fixed-rate mortgages during the introductory period, which can make them a more affordable option for homebuyers. However, it's important to remember that the interest rate on an ARM can go up after the introductory period, which could lead to higher monthly payments.
There are a few different types of ARMs, each with its own set of terms and conditions. Some of the most common types of ARMs include:
When choosing an ARM, it's important to compare different loan terms and interest rates to find the best option for your needs. You should also make sure that you can afford the monthly payments, even if the interest rate goes up after the introductory period.
Here are some of the pros and cons of adjustable-rate mortgages:
If you're considering an ARM, it's important to weigh the pros and cons carefully to decide if it's the right type of mortgage for you.
Here are some tips for choosing an ARM:
If you're not sure if an ARM is the right type of mortgage for you, give us a call and we'll weigh the pros and cons with you. We can help you understand the different options available and choose the best one for your needs.