A couple months ago, we shared tips to help Northwestern Wisconsin home buyers get the best mortgage rates. Today we’ll go into more detail about Adjustable Rate Mortgages.
An Adjustable-Rate Mortgage, or ARM, features a fixed interest rate for a limited number of years. Conventional, FHA and VA mortgage programs all offer ARM loans. There are 5/1, 7/1 and 10/1 ARMs, meaning the rate is fixed for five, seven or ten years before annual rate adjustments begin.
For example, a 5/1 ARM has a fixed interest rate for the first five years. At year six, your interest rate may change according to the index in your loan terms. Your interest rate, and your monthly payment, could go up (or possibly down) as a result. Your rate and payment could change every year from that point forward.
The initial rate on an ARM loan is typically lower than a 30-year fixed-rate mortgage. Buyers use ARM loans to get lower rates and boost their purchase power. The lower payment that comes with the initial period of an ARM can provide financial breathing room during the first years of home ownership.
When considering an ARM loan, think about how long you will live in the home. If you plan to sell before the adjustable period kicks in, you may not be concerned about higher payments in the future. As an option, you could refinance into a new, fixed-rate mortgage at some point down the road to replace the ARM.
Let us refer you to reliable lenders in Northwestern Wisconsin! As a locally-owned family business with over 40 years of experience, we can help you with the entire home buying process. Call Six Lakes Realty today for friendly, hometown service!
Six Lakes Realty
Office: (715) 924-4806