What are the benefits & short falls of a short term loan?
There are a number of benefits to a shorter term loan including lower interest start rates, the ability to purchase a more expensive home because the payments are lower, and the flexibility it provides clients looking for a loan where they can choose their monthly payment or optimize cash flow. The draw back to an ARM is that once your introductory rate is up (anywhere from 1 month to 10 years), your monthly payment could begin to increase if interest rates are climbing. Depending on the index this could happen annually or even as frequently as every month. These adjustments are usually capped on an annual basis and your mortgage advisor can tell you what your maximum cap rate for the life of the loan will be.
