What You Need to Know About ARMs
How much do you know about Adjustable Rate Mortgages? The truth is ARMs are not all the same and can have great value. Home buyers often focus on obtaining the lowest possible rate on a 30-year loan, but most mortgage loans are used for only three. Cash out transactions for improvements, additions, repairs, weddings, tuition and major purchases occur with great frequency. That being said, Adjustable Rate Mortgages are often misaligned, dismissed outright and completely misunderstood. If you think you might refinance for any reason anytime in the next seven years, read on for more information about ARMs, the benefits and the risks.
Lower Rates, Flexible Terms
Today, most ARMs are "hybrids." They start out at a fixed rate for the first 3, 5, 7 or even 10 years. During this time, you save on interest cost, and even though your payment is less, you still pay more toward principal.
Inside Information
Lenders give you a discounted rate up front because they know the rate will float with the market later on. If you sell your home or refinance again prior to that happening, it's their loss. You have the advantage here because you control the timing of your next step.
Managed Risk
One way to prepare for the possibility of a higher rate and payment later is to pay extra principal each month to reduce your balance faster. If the rate ultimately adjusts up, your balance will be lower and the payment change will be less as a result. As well, you would already be accustomed to paying more.
The Bottom Line
A fixed rate loan provides the certainty that it will never change. A hybrid ARM provides a guaranteed savings but for a limited period of time. The best way to decide is to balance your expectations for using any particular loan with the peace of mind that can come from being assured of stability, even if your time frame changes.
Rely on the Most Trusted Mortgage Professionals at the Lake of the Ozarks
If you're in need of a mortgage for a new home, need to find out about your refinancing options, or have any other questions pertaining to mortgage lending, put our 20+ years of experience to work for you! We can help you choose a mortgage program that's right for you and your specific needs. Call Mortgage Headquarters of Missouri, Inc at (573) 302-9990 to learn more!
Mortgage Headquarters of Missouri, Inc
4824 Osage Beach Parkway, Suite 1
Osage Beach, MO 65065
Office: (573) 302-9990
Toll Free: (888)799-1206
Fax: (636)648-9917
NMLS # 1229111
Lower Rates, Flexible Terms
Today, most ARMs are "hybrids." They start out at a fixed rate for the first 3, 5, 7 or even 10 years. During this time, you save on interest cost, and even though your payment is less, you still pay more toward principal.
Inside Information
Lenders give you a discounted rate up front because they know the rate will float with the market later on. If you sell your home or refinance again prior to that happening, it's their loss. You have the advantage here because you control the timing of your next step.
Managed Risk
One way to prepare for the possibility of a higher rate and payment later is to pay extra principal each month to reduce your balance faster. If the rate ultimately adjusts up, your balance will be lower and the payment change will be less as a result. As well, you would already be accustomed to paying more.
The Bottom Line
A fixed rate loan provides the certainty that it will never change. A hybrid ARM provides a guaranteed savings but for a limited period of time. The best way to decide is to balance your expectations for using any particular loan with the peace of mind that can come from being assured of stability, even if your time frame changes.
Rely on the Most Trusted Mortgage Professionals at the Lake of the Ozarks
If you're in need of a mortgage for a new home, need to find out about your refinancing options, or have any other questions pertaining to mortgage lending, put our 20+ years of experience to work for you! We can help you choose a mortgage program that's right for you and your specific needs. Call Mortgage Headquarters of Missouri, Inc at (573) 302-9990 to learn more!
4824 Osage Beach Parkway, Suite 1
Osage Beach, MO 65065
Office: (573) 302-9990
Toll Free: (888)799-1206
Fax: (636)648-9917
NMLS # 1229111
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