Adjustable Rate Mortgages
Adjustable rate mortgages, or ARMs, are attractive to some customers, particularly if they plan to remain in the home for a short period of time. The monthly payment on an ARM may move up or down depending on market conditions.
Benefits:
- Typically lower interest rate than a fixed-rate mortgage
- Rate cap limits
- Flexibility for selling or refinancing
Considerations:
- Monthly principal and interest payments may increase when the interest rate adjusts
- Monthly principal and interest payments may change every year after the initial fixed period is over
- If you choose an interest-only option, you cannot build equity through monthly interest-only payments without making voluntary principal payments during the interest only period
