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Adjustable-Rate Mortgages: What Are They & Are They Right for You?

In a rising rate environment, have you considered how an Adjustable-Rate Mortgage could help your hunt for a new home? An Adjustable-Rate Mortgage, also known as ARM, is a type of mortgage with an introductory interest rate that will last for a selected period of time (three, five or seven years) before adjusting at intervals for the remainder of your loan.

If an initial lower monthly payment is important, you don't plan to be in your home for the long-haul or plan to pay-off your mortgage in less than 10 years, an Adjustable-Rate Mortgage can offer rates that can be up to 1.50% less than a conventional 30-year fixed mortgage! When you crunch the numbers, you’ll see just how beneficial this could be.

Get The Most Out of An Adjustable-Rate Mortgage

With an Adjustable-Rate Mortgage, you'll have the option to pick a lower rate for an initial term of either 3, 5 or 7 years. Adjustable-Rate Mortgages can:

  • Provide more flexibility for a qualify buyer to be approved
  • Get you rates lower than 30-year fixed, which results in lower payments
  • Available for purchases up to 95%
  • Cash out refinance options available up to 90% (PMI required if over 80% LTV)
  • Loan is assumable to a future qualified buyer

An ARM can be a good idea if your life is likely to change in the next few years — for instance, if you plan to move or sell the house. While an ARM mortgage is less predictable than a fixed rate loan, the flexible interest rate may benefit you. If interest rates fall during your adjustable-rate period, you'll save without having refinance the loan, which is often the only way to lower monthly payments with a fixed-rate mortgage. However, Adjustable-Rate Mortgages certainly come with some real risks. If rates go up after your introductory period, your rate is not locked in and could actually go up, resulting in a higher payment.

If you like knowing what you’ll be paying each month on your mortgage, you could be better off with a traditional fixed-rate loan. If interest rates go up, you won’t have to worry about it because yours is locked in. No matter the situation you’re in, our Real Estate Lending team has a variety of options available to you. Let our expertise go to work for you!

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