ARM vs Fixed-Rate Mortgage Loan
When purchasing a home, almost everyone will need to take out a loan. What you then need to decide is do you want to go with an ARM (Adjustable Rate Mortgage) or a fixed rate mortgage.
When going with a fixed rate mortgage, you are typically going to see a term of 15 or 30 years. This means that over the period of time you chose (15 or 30 years) your interest rate will not change. This can be a good or bad thing depending on how the market does, no-one knows for sure.
With an ARM, the term varies a lot more and is usually shorter. A common ARM is a 5-1 ARM. This means that for the introductory period of 5 years, your interest rate will remain the same (and is typically lower than fixed rate) but after that five years, your interest rate is adjusted once per year to reflect where the market is at. Once again this can be good or bad depending on how long you plan to live in a home and what the market does.
In almost every scenario an ARM will have a lower interest rate at first, you just have to be prepared for when the term ends. If you are looking to educate yourself more on this topic/the world of real estate, or want an agent who is already educated in these areas, reach out to me personally.
Written by: Robert Judy