If you're in the market for a new home, and you're looking at mortgage options, you owe it to yourself to consider an adjustable rate mortgage, or ARM. Adjustable rate mortgages are gaining in popularity, especially now that interest rates are so low. Here are just four of the reasons why an ARM may the right option for you.
Lower Monthly Payments to Start
If you need lower monthly payments right now, but your financial situation will be changing in a few years, an ARM may be just what you're looking for. One of the benefits of an adjustable rate mortgage is that they start out with very low monthly payments. That's because your mortgage begins on the lower interest rate scale. This allows you to have the lower monthly payments you need until your financial situation improves.
There's a Limit to the Increases
If you're worried that an adjustable rate mortgage will continue to adjust the interest rates for the duration of your loan, you can stop worrying. Adjustable rate mortgages come with a set limit as to how many times the interest rate can increase. Once that limit has been reached, your interest rate cannot increase again. It's important to note that your interest rate usually won't go down much – even if the interest rates drop significantly.
Gives You Time to Fix Your Credit
If you have some minor credit blemishes that prevent you from qualifying for a low-interest fixed-rate mortgage, an adjustable rate mortgage may be the answer you've been looking for. Most adjustable rate mortgages stay at a steady rate for about the first five years, which will give you time to fix your credit problems. Once your loan approaches adjustment, you can refinance your home to a fixed-rate mortgage.
Great for Investment Properties
If you're getting into real estate investing, and you're looking at your first investment property, talk to your lender about an adjustable rate mortgage. This is particularly important if you plan to sell your property once you get it fixed up. An adjustable rate mortgage will allow you to keep your initial monthly payments low while you make the necessary updates and repairs to the property. You'll be able to put your property back on the market before the loan is scheduled for an adjustment.
If you're looking for the right mortgage for your new home, talk to your lender about the benefits of an adjustable rate mortgage.