The Advantages of an Adjustable-Rate Mortgage
When it comes to obtaining a mortgage, there are a variety of loan options available. One popular choice is the adjustable-rate mortgage (ARM). This type of mortgage allows for flexibility in your monthly mortgage payments and can offer certain advantages to borrowers. In this article, we will discuss the benefits of choosing an adjustable-rate mortgage.
Lower Interest Rates
The main draw of an adjustable-rate mortgage is the potentially lower interest rate compared to a fixed-rate mortgage. An ARM typically starts with an introductory period of lower interest rates that can last for anywhere from one to ten years. During this time, borrowers can enjoy lower monthly payments and get ahead financially. This can be especially beneficial for those who do not plan on staying in their home for the long-term as they can enjoy the low rates and then sell the property before the rate adjusts upwards.
Flexibility in Monthly Payments
Adjustable-rate mortgages also offer flexibility in monthly payments. While the interest rates may adjust at predetermined intervals, borrowers can enjoy lower payments during the introductory period. Moreover, if rates go down over time, borrowers can experience a reduction in their monthly payments. This added flexibility can be useful for those who have variable income or are on a budget.
Potential for Higher Savings
Another advantage of an adjustable-rate mortgage is the potential for higher savings. Since the introductory rate is usually lower than fixed-rate mortgages, borrowers can take advantage of the lower payments and put the extra money towards other expenses or savings accounts. Over time, this can add up and help borrowers secure a better financial future.
Option for Refinancing
Adjustable-rate mortgages also come with the option for refinancing. If interest rates drop significantly, borrowers can choose to refinance their mortgage with a fixed-rate mortgage. This can help them secure a lower rate and guarantee that their monthly payments will remain the same for the entirety of the loan terms. Additionally, with an ARM, borrowers have the opportunity to build their credit and financial standing, making them more appealing to lenders when it comes time to refinance.
Final Thoughts
While an adjustable-rate mortgage may not be the right choice for every borrower, it certainly has its advantages. With lower interest rates, flexibility in monthly payments, the potential for higher savings, and the option for refinancing, an ARM can provide greater financial freedom and opportunity. It is important to carefully weigh the pros and cons of each mortgage option before making a decision. Consult with a trusted mortgage professional who can provide guidance on what type of mortgage is the best fit for your unique financial situation.