When getting a mortgage for your next home, you will have the option to select from several different products. While the 30-year and 15-year fixed rate mortgages are popular options, there are adjustable rate mortgages (ARMs) that could be better for you depending on your financial and living situation. Consider these reasons to go with an ARM.
You'll Receive a Low Interest Rate
The biggest advantage of an ARM is going to be the lower interest rate during those first few years of your mortgage. It will cause your monthly payment to be much lower than with a 30-year mortgage, helping those payments be more manageable. Having lower payments could even help you afford a bigger home because of this.
You're Not Living In The House Very Long
Of course, that low interest rate will go away after the initial period of the ARM, but that may not be such a bad thing if you plan on moving around the time that the low interest period ends. This makes an ARM a great choice if you are moving for work related reasons, and know that you will be moving again within a few years. It allows you to afford that bigger home for a short period of time and have a mortgage that is more manageable for your budget.
Many homeowners select an ARM when they know for sure that they'll need to sell the home soon after moving in. Even if they go over the initial low interest rate period by a few months and pay a higher rate, they end up saving money in the end.
Your Monthly Payments Could Decrease
When you get a fixed rate mortgage, your rate stays the same throughout the entire duration of your loan. If the current interest rates go down, you are still stuck with a loan at the higher interest rate. You can always refinance, but that can be costly and will cause your amortization schedule to start over.
If you see interest rates dropping in the future, an ARM will allow you to get that lower interest rate when the time comes. With ARMs having an initial interest period that lasts between 3-10 years, it's possible that interest rates can change for the better by the time the initial interest period is up.
For more information about adjustable rate mortgages, speak to a local mortgage lender that can discuss the options with you.