Adjustable Rate Mortgage-Adjustable-Rate Mortgages (ARM’s) start at a low fixed rate for a specified amount of time but then become variable throughout the life of the loan.
Why can this be of value to you when buying or refinancing a home? Well, the initial interest rate for Adjustable-Rate Mortgages is lower than the interest rate you will pay with a Fixed-Rate Mortgage, thus lowering your monthly payments.
Additionally, if interest rates drop after the loan switches to variable, you will save money as the rate on your Adjustable-Rate Mortgage will drop as well.
However, if interest rates rise when your loan is variable, your rate will increase after your fixed period ends. An Adjustable-Rate Mortgage is the perfect loan product for people who plan on living in the home for five years or less.
For more info, contact a HBLending Home Loan Expert.