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What Is An ARM (Adjustable Rate Mortgage)?
Some people think of ARMs as just being a type of mortgage, but they’re actually more than that. Adjustable-rate mortgages start with low fixed interest rates for three to 10 years and then there will be periodic adjustments in interest rates after this period has passed; these changes can either help or hurt you depending on how much risk is involved (ie: if it’s risky loans). This means that anyone looking into buying property should consider both types before taking out any financing!
Adjustable Rate Mortgage Key Takeaways:
- An adjustable-rate mortgage (ARM) is a type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan.
- With adjustable-rate mortgage caps, there are limits set on how much the interest rates and/or payments can rise per year or over the lifetime of the loan.
- An ARM can be a smart financial choice for home buyers that are planning to pay off the loan in full within a specific amount of time or those who will not be financially hurt when the rate adjusts.
An ARM Loan might be be right for you:
- If you aren’t planning on living in the property long term
- If you plan on paying the loan off in the next few years
- If you know you will be moving within the next few years
- If this is an investment property
