Do you know about Adjustable Rate Mortgages (ARM)??
More buyers today are using Adjustable rate Mortgages to buy a house. Here’s what they are and why they are gaining in popularity:
An ARM is a mortgage that has a set interest rate for a predetermined amount of time, for instance 5.5% for 7 years. At the end of that time, the interest rate can increase but only by a certain percentage. There is also a “cap” on how much the interest rate can increase during the life of the mortgage.
Why are ARMs an attractive option now?
- Provides buyers a lower interest rate than the typical fixed rate mortgage – which has been rising in recent months.
- The lower interest rate increases the buying power and decreases the mortgage payments for buyers.
- On average, buyers stay in a house for 7-10 years, so many buyers would sell their house before the rate adjustment of a 7 year ARM.
- Buyers can watch the market and refinance at a lower interest rate before the predetermined ARM adjustment.
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