Adjustable-Rate Mortgage

Get a Lower Interest Rate and Save Money with an Adjustable-Rate Mortgage - A Smart Choice for Homebuyers Who Want More Flexibility and Affordability!

What is a Adjustable-Rate Mortgage?

An adjustable-rate mortgage (ARM) is a type of home loan in which the interest rate fluctuates periodically over the life of the loan based on an index or benchmark rate. The interest rate on an ARM is typically lower than that of a fixed-rate mortgage for an initial period, which can range from one month to several years, after which the interest rate adjusts based on the market conditions.

The adjustment period and the frequency of the rate adjustment depend on the terms of the mortgage. For example, a 5/1 ARM means that the interest rate remains fixed for the first five years of the loan, and then adjusts every year thereafter.

An ARM can be beneficial for borrowers who expect interest rates to decrease in the future, as it can result in lower monthly payments. However, an ARM also carries the risk of increasing monthly payments if interest rates rise, which can make it difficult to budget for the future.

ARMs are typically best suited for borrowers who plan to stay in the home for a short period, as they can take advantage of the lower initial interest rates and sell the home before the interest rate adjusts. Borrowers should carefully consider their financial situation and future plans before choosing an ARM or any other type of mortgage, and consult with a New Empire Mortgage Specialist to determine the best option for their individual needs.

Benefits of a Adjustable-Rate Mortgage

Lower initial interest rates

The initial interest rate on an ARM is typically lower than that of a fixed-rate mortgage, which can result in lower monthly payments and lower overall borrowing costs.

Flexibility

ARMs can be structured with a variety of adjustment periods, ranging from every month to every 10 years, which provides borrowers with the flexibility to customize their loan to their specific needs.

Potential for lower payments

If interest rates decrease, the interest rate on an ARM can also decrease, resulting in lower monthly payments and potentially lower overall borrowing costs.

Short-term ownership

ARMs can be beneficial for borrowers who plan to stay in the home for a short period, as they can take advantage of the lower initial interest rates and sell the home before the interest rate adjusts.

Refinancing

If interest rates decline, an ARM can be refinanced at a lower rate, potentially resulting in lower monthly payments and/or a shorter loan term.

Easier to qualify

ARMs may be easier to qualify for than fixed-rate mortgages, as they typically have more lenient credit and income requirements.

It’s important to carefully consider the costs and benefits of an ARM, as well as other types of mortgages, before choosing the best option for your individual situation. A New Empire Mortgage Specialist can help you understand the differences between ARMs and other types of mortgages and guide you in selecting the best option for your financial goals and needs.

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