Banks, credit unions, and other financial institutions in the business of lending money to prospective home buyers have over the years come up with many different kinds of mortgages. The idea behind all this variety, of course, is to give people as many options as possible when it comes to taking on such an ambitious amount of debt. So, in one sense the lending business is always a buyer's market, because lenders always need borrowers. One way in which many lending institutions sweeten the deal for prospective buyers is by offering adjustable-rate mortgages, more typically referred to as ARMs, with very attractive initial discounts. These initial discounts, which typically last for one year, promise lower and easier monthly payments on the ARM.
Many people feel that an ARM with initial discounts is the right way to go. Borrowers can breathe a sigh of relief knowing that after all the work and effort that they've put into buying their new home - whether it is finding the home, securing the mortgage, and going through more paperwork than they ever knew existed - can then relax for a year with monthly mortgage payments that will be easier to deal with. These initial discounts, referred to as initial-year discounts, are very tempting. For many people it is what makes them decide on going with a specific ARM that a bank offers.
The downside to an ARM and its initial discounts is that once the initial year is over, rates can increase dramatically and then essentially the borrower is using up savings to paying out.
To learn more about adjustable-rate mortgages, initial discounts, or any other kind of mortgage plan, be sure read the Related Mortgage Rates Articles section on Go Banking Rates.
