With the recent drop in fixed rates since the beginning of the year, no one seems to be talking about Adjustable Rate Mortgages (ARM's). This is for good reason too, the ARM has received a very bad reputation over the past couple of years. It is the ARM that caused the the subprime meltdown, which caused the credit crisis, which caused the banking crisis, which caused the economic crisis, which led to biggest financial crisis since the Great Depression! I'm pretty sure the ARM also is responsible for global warming, swine flu and Lindsey Lohan.
The poor ARM has taken a beating. But is it with just cause? To an extent the answer is yes. The subprime 2 yr ARM was one of the driving forces behind the housing bust. But not all ARM's are created equally. If taken by the right borrower, in the right situation, they are a GREAT option.
If you fully expect to sell or refinance your home in the next 5-7 years, you should consider a 5 or 7 year ARM. Why pay THOUSANDS more in interest, that you do not need to pay? Conversely, If you are going to apply for an ARM so you can qualify for a home that you can barely afford, than you should buy less house and taking a FIXED rate.
Everyone's situation is different. What may be the right loan for you, may not be the right loan for your neighbor. I advise that you work with a professional that will clearly discuss ALL option available to you and allow YOU to make an educated decision that is right for YOU!
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