The decision to buy a home is a huge one and finding a mortgage loan that will make this process easy and affordable is an imperative step. If you’ve determined that now is the best time to take on an adjustable rate mortgage, you may be able to creatively finance your way into snagging your dream home and making it yours.
How ARM Interest Rates Can Help You
Adjustable rate mortgages tend to charge a lower interest rate at the beginning of the loan as compared to a traditional fixed-rate mortgage. This makes budgeting for a new home purchase easier and may help someone with a lower income to obtain the property they want.
It is important to note, however, that after the introductory period (generally five years), the loan will reset and current market conditions will dictate your mortgage interest rate. It may become necessary for you to pay more in interest to keep your loan active. That’s why if you know your income will increase in the future, whether through a raise, inheritance or other means, an ARM may still be a more affordable option.
Additionally, since the interest rate on adjustable rate mortgages is lower, you may have more available cash to put toward a down payment and thus decrease the overall loan amount.
It’s very important to understand that using an ARM may help you afford a new home, but only if your finances will be able to handle the possibility of higher rates in the future. It’s impossible to predict what mortgage rates will do years from now, so know that low rates are not guaranteed. If you’re not sure an adjustable rate mortgage is right for you, investigate the many other mortgage loan options that exist.