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Is an Adjustable-Rate Mortgage Right for You?

With mortgage rates still remaining above where they were a few years ago, you may be wondering if there are ways you can get a lower rate on your home loan. There certainly are.

One of those ways is by getting an adjustable-rate mortgage. An adjustable-rate mortgage (ARM) is just what it sounds like, a home loan where the mortgage interest rate adjusts at certain points in the life of the loan.

People are drawn to ARMs because they offer a lower interest rate than a traditional 30-year, fixed-rate mortgage.

“One of the advantages of adjustable-rate mortgages, and I would say the majority of the advantage of the adjustable-rate mortgage, is [its] lower cost than a standard fixed-rate mortgage,” said Sergio Montalvo, sales trainer at New American Funding.

ARMs have a fixed interest rate that is lower than the market rate for a shorter time period, say five, seven or even 10 years. The rate adjusts to the market rate up to a predetermined cap, when that initial period ends.

An ARM may make sense if you’re not expecting to stay in the home for a lengthy amount of time or if you expect to refinance when rates drop.

Talk to your lender about your loan options and see if an ARM makes sense for you.