Adjustable Rate Mortgages
An adjustable-rate mortgage (ARM) has a variable interest rate applied to your VA, FHA, or Conventional loan’s outstanding balance for the entire length of your loan. Usually, the interest rate is fixed for a period of time at the beginning, referred to as the “initial rate period,” which can offer you the lowest rates and payments compared to fixed-rate mortgages. At Forthright Funding, this initial, low introductory rate is set for the first 5, 7, or 10 years of your adjustable rate loan, depending on you and your needs. After that period expires, the interest rate may change based on movement of the market’s interest rate index for the remainder of your loan’s 30-year term.
While your payments may change each time the rate resets, it does so on the years and balance that remain on your adjustable rate mortgage rather than on the initial loan amount. This can help minimize the difference between your previous payment and your new one.
Advantages of Adjustable Rates Mortgages:
1. You prefer not to hassle with the time and trouble of refinancing.
In the event interest rates drop, you can enjoy the automatic drop in your mortgage payments as well while your friend with the fixed-rate loan is scrambling to refinance in order to take advantage of the lower interest rates.
2. You know you’ll be moving at some point (starter home or relocating for other reasons).
If you’re confident you will want to sell the home during this first loan term, before you run the risk of an interest rate hike later, you can benefit from the lower initial interest rates of an ARM. Some people are first time homebuyers who choose an adjustable rate loan for a starter home, know they will be relocating soon, or otherwise don’t picture themselves staying in the home for an extended period of time.
3. You’re able to budget for a possible interest-rate hike.
You’re a good candidate for an ARM if you know that you’ll be able to afford to pay more each month in the event interest rates go up. There is a cap, or maximum rate hike, associated with every ARM. Forthright Funding’s adjustable-rate mortgage calculator can help you determine your maximum monthly payments.
Go to Forthright Funding’s ARM mortgage calculator and our other free financial wellness calculators to find out current mortgage rates and determine what’s best for you.
For more information on ARM rates and applying for a home loan, contact one of our mortgage specialists at (855) 351-9522.
