Adjustable-rate mortgages are among the least common mortgage types that most people are hardly conversant with, but are an excellent choice for a good number of them.
This is true especially for young and mobile homebuyers that have little-to-no worries about mortgage market risk, says a Portland mortgage company. Talking about home buying, if you have been here before, you are fully aware of the many different mortgage types there are in the market.
However, rarely do people choose a mortgage plan that matches their lifestyle. It is in these initial stages that you should decide whether to go for a mortgage with a fixed or adjustable rate.
The following will expound more on the ARMs since they are the least common types of mortgages in the market today.
Flexible repayment and other term features, as well as low initial payments, are the reason ARMs are attractive to young and mobile borrowers, and an excellent choice for home purchasing. ARMs interest rates vary from time to time concerning current market conditions.
Once you complete the initial period, which, typically, is fixed, your lender will use the current market interest rates and a margin amount to set a new rate, which will affect the borrower’s monthly payments.
Are ARMs Risky?
Well, you will be right to say that that is quite risky, but it is important you also note that there are limits above which ARM interest rates and monthly payments should not rise. Moreover, should the market interest rates remain low, you will enjoy the benefits of low ARM rates as a borrower.
All the above makes ARMs an excellent choice for homebuyers who plan to refinance their mortgages before the initial period is over.
But, when evaluating ARMs, good advice is, as is with other mortgage types, to consider the initial rate and period, as well as projections of all adjustment periods over your loan’s lifetime, a Portland mortgage company advises.