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Pros And Cons Of Adjustable Rate Mortgages
When you are in the market for a new home, you may be faced with numerous options for financing your home. One of the choices you will have to make is whether to apply for a fixed or adjustable rate mortgage. In some cases, an adjustable rate mortgage (ARM) may be your best option, but keep in mind, they are not the answer for everyone.
Adjustable rate mortgages can be risky for some borrowers and it’s important to understand both the pros and cons.
When To Consider Adjustable Rate Mortgages
Perhaps one of the best things about ARMs is they typically have a lower starting interest rate than fixed rate mortgages. For some borrowers, this means it is easier for them to qualify for a loan. ARMs are beneficial for borrowers who:
Adjustable Rate Mortgage Concerns
There are a number of different types of adjustable rate mortgages and they are each tied to specific interest rate indexes. While an ARM may offer borrowers some flexibility in terms of income and debt ratios, the downsides cannot be ignored. Some of the cons of using an ARM to finance your mortgage include:
Borrowers who are searching for the right mortgage should discuss all options with their loan officer. There are specific instances when an ARM may be the best option and there are other times, such as if you plan to stay in your home for more than five years, where a fixed-rate mortgage may be your best option.
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