If you are looking to purchase a home, you want the most competitive loan solution. With interest rates rising, many first-time homebuyers may be considering an adjustable-rate mortgage. Axia Home Loans offers adjustable-rate mortgages (also known as ARMS) for conventional and Jumbo loans. An adjustable-rate mortgage could mean a lower monthly payment initially, but there are risks as well.
What is the difference(s) between a fixed-rate mortgage and an adjustable-rate mortgage?
The two primary mortgage types are fixed-rate mortgages and adjustable-rate mortgages. A fixed-rate mortgage has an interest rate that will not change throughout the life of the loan. The rate you lock in when you purchase a home is the rate you will pay unless you refinance or sell your home.
With an adjustable-rate mortgage, the interest rate can change. The initial interest rate on an ARM may be lower than the rate on a fixed-rate mortgage. You will have a fixed period of time during which the initial interest rate remains constant. That period can vary (anywhere from 3-10 years) depending on the terms of your loan. Afterward, the interest rate on your mortgage can adjust up or down.
What are some benefits of ARMs?
If you are looking for a home that you plan to live in for a few years before moving, then an adjustable-rate mortgage may be a good option. The initial rate you pay may be lower than the market rate, saving you some money on your monthly mortgage payment. If you decide to stay in your house, you can also refinance at a fixed rate, so your mortgage payments remain constant moving forward.
What are the risks?
ARMs have a fixed period during which your interest rate remains constant. After that period, the rate can increase, which means your mortgage payments will also increase. The monthly payments may also change frequently over the life of your loan depending on the market rate and the terms of your loan.
An adjustable-rate mortgage is a good option for homebuyers looking to purchase a home you plan to live in for a few years. If this is your current goal, then give an Axia Mortgage Specialist a call. You will also learn about our loan solutions and what option is best for you.
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