Buying the first home is one of the biggest events in a person's life. Here in the United States, it is definitely a milestone, an important road mark in our arc from childhood to adulthood. Indeed, with all the responsibilities of buying a home, this automatically automatically makes you an "adult." One reason for this is because you, the first-time home buyer, have taken on an enormous amount of debt in the form of a mortgage. Whether you opted for an adjustable-rate mortgage (ARM), a fixed-rate mortgage, or any other kind of mortgage, the fact remains that you are now dealing with a big sum of money. As part of the pride you may feel on becoming a home owner, you might want to go above and beyond your monthly mortgage payment and work extra hard to pay it off sooner than it's scheduled to be. When this happens with an ARM, you are prepaying your loan.
Prepayment of an adjustable rate mortgage sounds good, especially on paper since you're putting extra money towards your mortgage in hope of reducing your mortgage debt. Many people do prepayments because they want to pay off as much of the principle as possible so they don't have to worry about a rise in interest rates the next year. However, the problem with prepayment is that depending on the terms of your ARM loan, you may get hit with fees and penalties should you make a prepayment. Be sure to read the fine prints of your loan agreement since these types of fees and penalties will vary from lender to lender.
Read more about adjustable-rate mortgages to weight the pros and cons before committing to one if you are considering to buy your first home, and if you've already purchased your home with an ARM then remember to check if you can make prepayments on your loan without being penalized.
