Adjustable Rate Mortgages are Making a Comeback.

With interest rates rising on fixed rate conventional mortgages, 2017 may be a year to consider whether an Adjustable Rate Mortgage (ARM) is a suitable loan alternative. Fixed rate mortgages are currently at their highest averages in over two years, and the sharp run up in rates since the election has priced many potential home buyers out of the market.

Adjustable Rate Mortgages, when compared to a fixed rate mortgage, offer lower rates and terms that certain homeowners may benefit from. Today’s ARM loans are often referred to as “hybrid loans” because they have an initial fixed-rate term, followed by an adjustable rate period for the remainder of the loan term. The fixed rate term of these loan products generally runs between 5- and 10-years.

Generally, the fixed rate portion of these hybrid loans is running about 0.75% lower than a comparable fixed rate loan. Unlike the ARMs of the past, current ARMs do not have prepayment penalties, and adjust only once per year after the initial fixed-rate period. Rate adjustments are limited by caps that are established at the outset of the loan, which minimize the worst case scenario.

A homeowner’s risk tolerances and personal preferences will help to determine which adjustable rate product is most suitable. If you are just starting your career, don’t have children, and don’t plan on staying in your current residence for more than five years, the 5/1 ARM may be your best choice; while if you intend to stay in your house longer and have less risk tolerance, the 7/1 or 10/1 loans may be best for you. Keep in mind that the longer the fixed rate term runs, the higher the corresponding rate will be.

Visit www.firstindianamortgage.com for additional information, or to obtain a free, no-hassle rate quote.

With interest rates rising on fixed rate conventional mortgages, 2017 may be a year to consider whether an Adjustable Rate Mortgage (ARM) is a suitable loan alternative. Fixed rate mortgages are currently at their highest averages in over two years, and the sharp run up in rates since the election has priced many potential home […]