May 24, 2017

Is An Adjustable Rate Mortgage (ARM) Right For You?

With traditional 15 and 30 year mortgage rates still near historic lows, adjustable rate mortgages are often ignored by home buyers. It’s certainly attractive to lock into a low fixed rate that won’t change over the life of the loan, but what if you don’t plan to stay in your new home for long? What if you have a job that requires frequent moves? Home buyers (and those looking to refinance) often automatically default to traditional fixed rate mortgages, even when an ARM might suit them better.

An ARM starts with a rate that is significantly lower than its fixed rate counterpart. The ARM’s rate stays fixed for a set period of time (5 to 7 years), but then adjusts yearly thereafter, upward or downward, to reflect overall mortgage rates. Maximum increase caps are in place to protect borrowers from potentially wild rate increase swings.

The upshot:

  • Lower monthly payments (compared to fixed rate loans) for the chosen term (5 or 7 years)
  • No rate increases if you move (or refinance) during that initial term
  • Lower monthly payment means you may qualify for a larger loan

How can you know for sure if an ARM is right for you? Contact a LMCU mortgage pro at (800) 242-9790 ex.9912 for a full, free analysis of your situation.