{"id":2572,"date":"2017-06-26T13:43:47","date_gmt":"2017-06-26T18:43:47","guid":{"rendered":"https:\/\/riverbankfinance.com\/blog\/?p=2572"},"modified":"2017-06-26T16:12:13","modified_gmt":"2017-06-26T21:12:13","slug":"are-adjustable-rate-mortgages-still-too-risky","status":"publish","type":"post","link":"https:\/\/riverbankfinance.com\/blog\/are-adjustable-rate-mortgages-still-too-risky\/","title":{"rendered":"Are Adjustable Rate Mortgages Still Too Risky?"},"content":{"rendered":"

I know what you\u2019re thinking: <\/span>Why would I ever want to get an Adjustable Rate Mortgage? Isn\u2019t it too risky? <\/span><\/i>Sure, it could be. But there are actually some circumstances in which it might be the best option. Let\u2019s look at the pros and cons of ARMs, and you can decide whether it\u2019s too risky or just the right fit for you.<\/span><\/p>\n

Benefits of ARM Loans<\/b><\/h1>\n

When you choose an ARM, your mortgage rates and payments start out lower at the beginning of your loan and have the potential to gradually increase over time. \u00a0Because of the lower payment at the outset, you could qualify for a larger or more expensive home than you originally thought possible.<\/span><\/p>\n

If you are planning on selling your home in a few years, an ARM may be your best option because you can lock in your low payment at a fixed rate for three or five years. Having that low payment may save you thousands of dollars more than you would with a traditional fixed rate mortgage. <\/span><\/p>\n

Let\u2019s say your ARM monthly payment is $200 less than you\u2019d pay had you gone with a traditional mortgage. If you decide to invest that $200 you\u2019re saving, you could end up earning interest instead of paying interest on your monthly savings.\u00a0<\/span><\/p>\n

Also, with an ARM, you never have to refinance your home. After the initial three or five years with the locked-in fixed rate, the interest rates could drop on their own without you having to pay closing costs and refinancing fees. <\/span><\/p>\n

Downsides of ARM Loans<\/b><\/h1>\n

With an ARM, your mortgage rate typically fluctuates with the economy after the first three or five years, depending on what kind of ARM you choose. When the interest rate adjusts, so does your mortgage payment. Your payment may go up or down depending on the current rate environment at the time of your adjustment period. If rates go up, your mortgage payment may rise accordingly. For your protection, Adjustable Rate Mortgages have built in Caps which will limit the potential increases in the rates.<\/span><\/p>\n

With one type of ARM, a negative amortization loan, the minimum monthly mortgage payments may not include the full interest amount so they can be more affordable for borrowers. So, the unpaid interest gets tacked onto your principal balance. <\/span>In this case, you\u2019ll end up paying more on your overall mortgage \u2014 even if you make all your payments in time. <\/span><\/p>\n

Generally, ARMs can be confusing. Thankfully, the Consumer Finance Protection Bureau has created a great Adjustable Rate Mortgage Resouce Book<\/a>\u00a0<\/span>that explains the ins and outs of how they operate.<\/span><\/p>\n

If an ARM still sounds too risky for you, you can always opt for an <\/span>FHA<\/span><\/a>, <\/span>VA<\/span><\/a>, <\/span>USDA rural development loan<\/span><\/a>, or <\/span>conventional 15 to 30-year mortgage<\/span><\/a>. <\/span><\/p>\n

As long as you understand how it works and plan your finances accordingly, an ARM could be a great fit for you. Schedule an appointment with one of our mortgage professionals at (800) 555-2098 for more information or to find out which kind of loan best fits your needs.<\/span><\/p>\n\n

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