Ask people and many will say a conventional mortgage is your best option because your monthly payments will stay the same throughout the entirety of the loan. However, here are two times when getting an adjustable-rate mortgage (ARM) is the best choice.
You'll Be a Short-Term Homeowner
Conventional mortgages are great if you plan on staying in your home for the rest of your life. Experts found, though, that most people only stay in their homes for six to nine years before moving on. If you know you're not likely to remain in the property for more than a decade, then you may save more money by getting an ARM loan.
While it's true that the interest rate on an ARM can potentially shoot up to an unaffordable level, the rate typically starts out on the low end, sometimes well below what's being offered for a conventional loan. The low rate will also last for a number of years before the bank resets it to a new level based on the market. For instance, the bank may offer you an ARM at 3 percent for the first 5 years before adjusting it to 4 percent.
Even if you decide to stay in the home beyond the initial years you thought you'd be there, there's nothing stopping you from refinancing the loan to one with a fixed rate. Be sure to consult with a mortgage expert to determine if it makes good financial sense to do so before making the change.
You'll Have Trouble Qualifying for a Conventional Mortgage
If you don't have a lot of money, an adjustable-rate mortgage could help you qualify for a home you would otherwise be denied if you were applying for a fixed-rate loan. Since ARMs start with a low rate, your monthly payments will be less, and the bank will look at these lower payments to determine if you can afford the house based on your income.
This means it will be easier to qualify for the home you want at your current income or get a bigger home for the same monthly payments as those associated with a fixed rate.
As noted previously, you can always refinance the loan at any time. So, if you think you'll be making more money down the road, you can always switch to a conventional loan once your income increases to the desired level.
For more information about adjustable-rate mortgages or help finding the right home loan for you, contact a local mortgage lender.
Hello, my name is Sigmond Jenner. Welcome. I am here to talk to you all about acquiring personal loans for emergency expenses. Although everyone should have an emergency fund in a savings account, there are many barriers to achieving that goal. In the meantime, you can look into acquiring a loan to cover emergency expenses that may come up. You should be prepared ahead of time, so you can act fast when unexpected financial expenses arise. I will provide information you can use to prepare yourself for this process. Please come back again anytime to learn more about acquiring loans as needed.