ARM Loans – Adjustable Rate Mortgages
ARM Loans are ideal for certain types of borrowers, but certainly not all. Some of those who they are suitable are people who feel it is probable that they will not stay in a home for long, or are confident they will refinance within the amount of time that the ARM loan rate adjusts, or simply those who can afford to risk having a higher payment.
Rates are extremely unpredictable and volatile. They can adjust higher or lower at anytime and even financial analysts and the savviest of mortgage experts can not predict where they will be several years from now, let alone even a year from now. There, it is imperative that you consider all possibilities including what the “cap rate” on an ARM loan could be in the event of a scenario where rates skyrocket.
There are, fortunately, some advantages to an ARM loan. We don’t want to scare anyone away from an ARM loan, but we want to make sure you understand all the pros and cons and consider them carefully. An adjustable rate mortgage can be used for a home purchase or refinance. Our home loan programs allow 3 year, 5 year, and 7 year adjustable rate mortgages. The advantage of an ARM loan compared to a fixed rate mortgage is that they usually offer a lower interest rate, which can save someone hundreds or even thousands of dollars every year.
Another possible scenario is that someone who does not refinance out of their ARM loan may see rates go lower. This was the case of people who refinance a 3-7 years ago and have had their loans adjust to current market rates, resulting in payments going lower. So it really can go either way.
The fact that rates are currently so low we are seeing most borrowers opt for a fixed rate mortgage. If you are currently in an ARM loan and wish to switch to a fixed rate mortgage, we can help.
For those who are determined to get an ARM loan, you may be pleased to hear that we have ARM loan programs for everything from conventional loans, FHA loans, VA loans, USDA loans, and jumbo loans. We can offer a 3/1 ARM, 5/1 ARM, and 7/1 ARM on all of these.
The one popular ARM loan that is still popular in spite of rates being so low is ARM loans for jumbo mortgages. The high loan amounts means that ever smidgen of a lower rate equates to more significant payment reductions.
To learn more about our home loan programs that offer an adjustable rate, give us a call today.