When you buy a home, you’re presented with a lot of options – type of mortgage, term length, fixed-rate or adjustable…
Let’s discuss the latter so that you go into the homebuying process knowing the pros and cons of each and which would be right for you.
In a nutshell – a fixed-rate mortgage is consistent, predictable, and unchanging. Whereas an ARM – or adjustable-rate mortgage – is for those of you who like a little bit of danger in your lives. Well, not danger per se, but maybe you’re more risk-tolerant.
When you opt for a fixed-rate mortgage, you lock in an interest rate for the entire life of the loan. So if you lock in a 3% interest rate, it’ll stay at 3% for as long as you have that loan… unless you refinance, but that’s another story for another day. This means that your monthly payments will never change, which makes budgeting super easy.
With an ARM, you’ll usually get a competitive interest rate, but after an initial fixed-rate period, that rate will “adjust” or fluctuate based on the current market conditions. If your fixed-rate period is five years, for example, then after five years of mortgage payments, your rate could jump from 3% to 5% depending on the market. And that, my friend, could really make a difference in your monthly payment amount. On the flip side, the rate could go down. So it’s really a gamble.
If ARMs are so unpredictable, why would you choose that option? Well, if you’re only planning on being in the home for a short period of time, it might be worth the risk to lock in that smaller introductory rate and then see what rates do from there. It’s all about your personal situation. It’s definitely not for everyone. But of course, your Homespire Mortgage Loan Officer will help you choose the right option for you.
Visit https://www.homespiremortgage.com/loan-officer-search/ to find a Homespire Loan Officer near you.