ARM’s transfer to borrowers a portion of the risk associated with a changing economy.
In exchange for sharing the risk, ARM’s offer borrowers initial interest rates that are substantially lower than fixed-rate mortgages.
The lower interest rate may help
borrowers qualify more easily.
Principal and interest (P & I) does not change.
Fixed-rate mortgages fully amortize over a defined period of time and are paid in-full at the end of the loan term.
Different loan terms are available (15- and 30-year terms are most popular).
There are many loan programs available. The table below describes some of the more commonly offered programs. The characteristics of each loan program are unique. To determine the program that is best for your needs, please consult your mortgage professional.
Below are some of the questions and concerns your mortgage consultant will discuss with you:
How important is payment certainty? If knowing that your payment will be the same every month is important, consider a fixed-rate mortgage.
How important is rapid equity buildup? If rapid equity buildup is a factor, consider a shorter amortization period, such as a 15-year, fixed-rate mortgage.
Do you anticipate increasing or stable income? If income growth is anticipated, you could take advantage of a lower start rate on an ARM.
Other factors to consider include:
Ability to qualify at market rates for loan amount selected
Anticipated term of occupancy
Possibility of significant rate changes
Existence of up-front costs