Overview of Adjustable Rate Mortgage Loans
An Adjustable Rate Mortgage, or ARM as it is popularly referred to, is a loan option whose interest rate changes after a fixed number of years (typically 5 or 7 years). After this fixed period of time, the rate will likely adjust, either increasing or decreasing your monthly payments.
A variable rate home loan, also called an adjustable rate mortgage (ARM) is a popular choice for borrowers, generally featuring interest rates that are less than a fixed rate loan. Although, rates can up or down, they could be an excellent substitute when compared with a long-term mortgage such as a 30 year-fixed rate mortgage.
If you are considering moving in a few years for a job transfer, be closer to relatives, or schooling it is a good choice. ARMs are a less expensive method to buying a home for those who don't intend on staying more than 5 to 7 years, because of their lower interest rates and consequently, smaller monthly payments.
An ARM can provide you with the lowest interest rate available although there is more risk to the borrower because of the possibility that the mortgage interest rate may rise as soon as the initial fixed-term is over.