If you’re thinking about buying a home, you’re probably also thinking about mortgages and which kind of home loan would suit you best. One popular mortgage loan option is the adjustable-rate mortgage, also known as the ARM. Adjustable rate mortgages are made up of several components, which can vary from lender to lender, but one of these major components is the adjustment period. The adjustment period refers to the time when an ARM’s interest rate changes from a fixed rate to one that reflects the market to which it’s tied.
Why the ARM Adjustment Period Matters
When you decide to finance the purchase of your home with an adjustable rate mortgage, you are agreeing to a loan that will have fluctuating monthly payments once the introductory fixed-rate period is over. The rates changes according to various interest rate indexes, but it can go up as well as down. If the ARM adjustment period happens to be when interest rates are trending upward, you’ll end up with higher monthly payments.
Of course, if interest rates go down, so will your adjustable rate mortgage payments. That’s the situation all borrowers hope for when securing an ARM, but unfortunately, that’s not always the case.
Taking out an adjustable rate mortgage as opposed to a fixed-rate mortgage can be a gamble, so they’re not for everyone. To learn more about ARMs, adjustment periods and other mortgage options available, be sure to meet with a financial professional. He or she can review all your options with you and find the one that suits your needs.
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