Adjustable rate mortgages

Adjustable rate mortgages (ARMs) are confusing to many home buyers. And, it doesn’t help that a lot of loan officers don’t properly explain them.

Are they good? They can be.

Are they bad? They can be.

In a nutshell, an ARM is a loan that has a starting interest rate for a certain period of time, and then after that initial period, it adjusts, according to factors determined by the economy. 

The advantage of an ARM is that you would get a lower initial rate than a fixed rate. The downside of an ARM is that you simply can’t predict what happens after the ARM starts to adjust, after the initial rate period.

An ARM can be a great way to save a lot of money as long as the rate doesn’t adjust up much at all. But, you can’t predict the future, so if rates go up due to economic factors beyond your control, your mortgage payment goes up as well.

So, what’s important to know is, before you commit to getting an ARM, you want to know exactly what it is that you are committing to, and how ARMs can adjust in the future.

To explain it, we made this five minute video. It’s everything you need to know about ARMs, in a bite sized nugget.

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