Should you consider an adjustable-rate loan?

With mortgage rates near historic lows, it’s no surprise that most home buyers select fixed-rate home loans. But if you’re comparing all of your loan options before you buy, you might want to take a few minutes to learn about ARMs.

With an adjustable-rate loan, you get a fixed rate for a set number of years before the mortgage adjusts annually based on a particular index value. (The most common ARMs being offered today offer a fixed rate for 3, 5, 7 or 10 years.) The main benefit to an ARM is that you’ll save money upfront because the introductory rate is typically lower than the rate you would get with a fixed-rate loan. But with an ARM, your run the risk of facing a higher mortgage rate once the fixed-rate period is over and the rate adjusts.

Adjustable-rate loans can be a good choice for home buyers who are planning to sell their homes before their low introductory rate adjusts upward. The decision on whether to go with an adjustable-rate mortgage ultimately depends on how long you plan to live in your home and how much uncertainty you can handle. If you plan on being in your home over the long term, locking into a fixed-rate loan probably makes the most sense. But if you don’t plan to live in your house that long, an ARM might be a good option for you. Want to learn more about ARMs? Reach out to us anytime. We look forward to answering your questions!