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Adjustable Rate Mortgage
An adjustable rate mortgage (ARM) is, in many cases,
a hybrid loan. Some ARMs actually have a period in which
a person will have a fixed rate. This fixed rate tends
to be lower than one that a person would receive with
a standard fixed rate mortgage. However, once the period
is over, the rate will shift, sometimes becoming considerably
higher. People who are interested in an ARM will usually
have to go through a bank or savings and loan, as many
direct lending services don’t offer the option. Adjusted
mortgage loans are usually harder to qualify for than
their fixed rate counterparts, because for a certain
amount of time, the borrower assumes very low risk.
People with bad or even average credit may very well
have their ARM applications denied.
3/1, 5/1, and 10/1 Adjustable Mortgage Loans
A standard ARM resets annually. This means that a borrower’s
APR can increase after only one year of paying the loan.
However, there are 3/1, 5/1, and 10/1 loans that have
fixed rates for three years, five years, and ten years,
respectively. These loans give a person a chance to
enjoy low monthly payments and save money in a way that
most other loans do not. Adjustable mortgage loans don’t
really benefit people who plan to live in a home for
20 or 30 years. They are much better for individuals
or families who intend to move. A person who secures
a 3/1, 5/1, or 10/1 adjustable loan will maximize his
benefits if he moves soon after the fixed rate term
has ended. As time goes on, the loan can become even
less beneficial than a long-term fixed rate mortgage
loan.
Hot ARM Loans: UPDATE - It marked
the highest level for one-year ARMs in three years this
month as they seem to be growing in popularity. One-year
adjustable rate mortgage rates increased past the 5% level but are still in high demand.
More Information
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