What are the benefits of an ARM?
‘ With a lower initial interest rate (usually 2% to 3% lower than fixed-rate mortgages), qualifying is easier and the payments are more manageable at first. ‘ You may qualify for a larger loan than you would with a fixed-rate mortgage. ‘ If you’re only planning to stay a short time the interest rate is likely to stay lower than that of a fixed-rate mortgage. ‘ If you expect regular pay increases that would cover the increase in your interest, or if you believe interest rates will fall, an ARM might be the wiser choice. A few words of caution: Negative Amortization -This happens when a lender allows you to make a payment that doesn’t cover the cost of principal and interest. Watch for this, it may be used as a lure to get you into a home with the promise of low initial payments. Or, a lender may give you a payment cap instead of a rate cap. In this mortgage arrangement, if interest rates increase, your monthly payments could stay the same – but the higher interest will still be charged
‘ With a lower initial interest rate (usually 2% to 3% lower than fixed-rate mortgages), qualifying is easier and the payments are more manageable at first. ‘ You may qualify for a larger loan than you would with a fixed-rate mortgage. ‘ If you’re only planning to stay a short time the interest rate is likely to stay lower than that of a fixed-rate mortgage. ‘ If you expect regular pay increases that would cover the increase in your interest, or if you believe interest rates will fall, an ARM might be the wiser choice. ? A few words of caution: Negative Amortization -This happens when a lender allows you to make a payment that doesn’t cover the cost of principal and interest. Watch for this, it may be used as a lure to get you into a home with the promise of low initial payments. Or, a lender may give you a payment cap instead of a rate cap. In this mortgage arrangement, if interest rates increase, your monthly payments could stay the same – but the higher interest will still be charge
