Are adjustable rate mortgages right for you?
Adjustable Rate Mortgages are popular among individuals who are more likely to move from one house to another spontaneously. This is an idea of owning a house for the short stay that you are going to have, which could be anywhere between 3-10 years. Adjustable Rate Mortgages have their own fair share of pros and cons. Depending on your requirements and what these Adjustable Rate Mortgages are willing to offer, you can decide whether or not to go for one.
When an ARM is suitable for you:
Adjustable Rate Mortgages are suitable for you when you are not sure about staying for a longer period of time in your house. As a family, you could downsize your house easily, as and when your kids grow up. Later, you will need a new house and a whole new mortgage. To avoid this, you could go with Adjustable Rate Mortgages. Another advantage is that, you could easily change from an ARM to a fixed mortgage anytime you want. Hence, the fluctuation and the constant change of interest can be avoided when you want to settle in the same place.
Adjustable Rate Mortgages give you the option of reducing your monthly interest rates. This further helps in easing up on other bills that are to be paid in the household. For the first few months, your ARM will be of low interest and it will constantly change, meaning you only pay interests that go hand in hand with the market state.
Why you shouldn’t choose an ARM:
Since it is constantly fluctuating, interests could rocket to great heights and drop to deeper grounds very often. When the latter happens, it isn’t an issue because it is profitable for the customer. But when interests increase with respect to the market trends, you will regret not having chosen a fixed mortgage.
It costs a lot to change from Adjustable Rate Mortgages to a fixed mortgage. Quite literally, it could cost thousands of dollars just to change your mortgage plan. Interest rates could increase over a period of time and the fluctuation might give a general hike to the prices, making your budget extend far beyond planned.
The uncertainty in Adjustable Rate Mortgages is the only major con from the customer’s point of view but if you are well acquainted with market trends, then you can easily make your way out of the financial web. Fixed mortgages too have their own risks. It is better to analyze what you are looking for and then zero in on a mortgage plan.
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Kelly Welton
(NMLS: 314183)
Members Direct Home Loans
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Disclaimer: All information in this blog is deemed reliable but is subject to change at any time and is not guaranteed to be accurate nor are there any warrantees either express or implied. This blog is not intended to offer any legal, tax or other advice
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