Making the Choice for Adjustable Rate Mortgages, ARM Complete Guide

If you are in the market for a home and weighing your buying options you probably have heard of the various types of mortgage programs available to you in the United States. Fixed rate mortgages are the more popular among homeowners however adjustable rate mortgages offer distinct advantages that many buyers overlook. But what are adjustable rate mortgages and why would someone choose this over a fixed rate?

• An adjustable rate mortgage has interest rates that vary. They typically rise and fall with the overall housing market’s interest rates but you can expect them to change after 3, 5, or 7 years.
• Many adjustable rate mortgages are tied to indexes such as Prime rate, Cost of Funds, or LIBOR. Although this is just a technicality it will affect how the payments change over time. A lender can tell you why they are using a specific index as a basis.
• The biggest benefit to an adjustable rate mortgage is lower monthly payments and great savings during the first few years of the loan.
• The biggest risk for you is that interest rates rise increasing your own rate and making it impossible for you to continue paying your monthly fees.

If you choose to go with an adjustable rate mortgage for your home the bank typically will reward you with a lower initial rate because you have decided to take a majority of the risk in owning the home; the risk being that interest rates could rise in the future. This is in contrast to fixed mortgage rates where the bank takes on more of the risk. With a fixed mortgage rate, if interest rates rise, the bank is stuck loaning you money at below the market rate.

Risk verse Reward

You will notice the advantages of an adjustable rate mortgage during the first few years of home ownership. Your payments will be low for several years; however after a set and agreed upon time the rates will adjust to match the market. This usually, but not always, results in the interest rates going up because the bank set them so low to begin with as a reward for taking on the risk. Therefore you may benefit from all that saving you did over the course of the beginning of the loan but now the rates have risen. Sometimes the payments increase dramatically and you have to be prepared for this. Careful planning is essential.

Managing your mortgage

Before you decide to start looking at the current adjustable mortgage rates available it is important to know how to manage one in the future. You need to pick the right type. Negotiate with your lender to have a loan with restrictions and “caps”. These are limits to how much your mortgage will adjust. A lender should understand this and not want you to have rates increase to a point where you have to default on the loan. You can get caps for interest rates applied to the loan, caps on the dollar amount you pay each month, or a guarantee on the number of years that pass before the rates change.

Visit www.real-estate-yogi.com for help on how to manage the risks associated with adjustable rate mortgages. They can advise you on many things related to real estate and are available anytime for consultation at 1-800-987-1397.

The Benefits of Adjustable Rate Mortgages

What are adjustable rate mortgages? This is something everyone needs to know before they make the decision to apply for an ARM. Some people feel more comfortable with a fixed rate mortgage, but there may be advantages to the ARM for some borrowers.

Benefits of ARMs

If you are like I am you are probably afraid of even considering one of the adjustable rate mortgages. The truth is these types of mortgages are not right for everyone, but there are definitely some benefits for those who have the current financial resources to enter into this type of arrangement. According to Real-Estate-Yogi.com, ARMs are best for those homeowners who fit into the following categories:

• Homeowners who only plan to stay in the home for a short period of time
• Young couples who are just starting in their careers and are not yet making enough money to qualify for their dream home with a standard fixed rate mortgage
• Older couples who may be interested in financing a vacation home into which they plan to move when they retire (they may wish to sell their current residence and refinance the ARM at a later date)
• Couples who are in the midst of a career change and thus may be on the bottom of the scale salary-wise

If you’re considering an ARM you may wish to take some time to browse through the Real Estate Yogi website. If you would like more information enter your contact information on the form provided on the website. One of the professionals will contact you as soon as possible.

Applying for an ARM

Have you made up your mind that an adjustable rates mortgage suits your lifestyle? Before you fill out any applications, you want to conduct some research in order to make sure you get the best possible mortgage available. The more time you spend researching, the better the chances are you will obtain the best possible rate.

Is an ARM Right for You?

Before you make a decision about an adjustable rate mortgage you need to decide whether this is the right type of mortgage for you. There are many facts to consider such as how long you plan to live in the house, how much of a mortgage you can afford and most importantly whether you have the financial resources to afford the monthly payments once the fixed rate period is over.

If you’re considering an adjustable rate mortgage, you may want to visit www.real-estate-yogi.com and browse through the excellent information. Visitors also have access to a free database of thousands of legal and financial representatives all over the United States. If you are interested in setting up a free consultation with one of the experts, call 1-800-987-1397 any time of the day or night.