Deciding on a suitable financing option and what type of interest rate you will pay on your home loan are major factors to consider when purchasing a new home, and selecting an interest rate that works best for your situation can end up saving you a great deal of money in the long run. In an adjustable rate mortgage, the interest rate changes throughout the life of the loan, and can be very advantageous for certain home buyers. If you are interested in buying a home in Jacksonville, Florida, and want to determine if an adjustable rate mortgage is the best option for you, the loan specialists at North Star Mortgage Network, Inc. are here to help.
What Is an Adjustable Rate Mortgage?
With an adjustable rate mortgage, (sometimes referred to as ARM), the interest rate applied to the outstanding balance of the loan varies throughout the duration of the loan, basically meaning that the interest rate can increase or decrease. At the beginning of an adjustable rate mortgage, the interest rate is fixed for a certain period of time, and during this time, the initial rate tends to be lower than a fixed rate mortgage. After the fixed rate time period is over, the interest rate will then fluctuate according to certain economic benchmarks and the ARM margin. In certain cases, the interest rate associated with an adjustable rate mortgage can increase, resulting in the buyer paying a higher amount, however, it is important to note that adjustable rate mortgages have limits in place that protect a borrower from major increased interest costs.
Is an Adjustable Rate Mortgage Right For Me? The Benefits and Drawbacks
For certain borrowers, an adjustable rate mortgage can offer several benefits, however, it may not be suitable for others. One benefit of an ARM is that the interest rate and monthly payment will be lower during the fixed initial rate, which can help borrowers save money. Adjustable rate mortgages are a great option for someone that is planning on relocating after a couple of years and that can afford to pay off the loan before the increase of the interest rate. Adjustable interest rates also may come with certain drawbacks for some borrowers, including possibly having to make significantly increased payments due to a rise in rates, and adjustable rate mortgages have complex guidelines, which can make understanding the terms somewhat difficult for the borrower.
Determining If an Adjustable Rate Mortgage Is Right For You
Financing a home with an adjustable rate mortgage can be very beneficial for certain borrowers. If you are looking for your ideal home in Jacksonville, Florida, the loan specialists at North Star Mortgage Network, Inc. can work closely with you to determine if an adjustable rate mortgage is the best option for you. Contact us today for a consultation.