5/1 Adjustable Rate Loan

If you plan on living in your home for less than 5 years, you can’t beat today’s rates on 5 year adjustable mortgages.

With a fixed-rate mortgage, the interest rate stays the same during the life of the loan.  With an adjustable rate mortgage (ARM), the interest rate changes periodically, usually in relation to an index, and payments may go up or down accordingly.  There are many reasons why an ARM may be the best mortgage option for a borrower:

• ARM rates are lower than comparable fixed rates.
• Individuals that expect to move within 5 years may save a significant amount of money with an ARM.
• If the borrower believes interest rates will continue to decline, ARM’s may make sense.
• ARM’s typically have rate adjustment caps that limit the extent to which the interest rate can rise.
• Borrowers that are considering ARM’s must ask themselves several questions to determine if an ARM is right for them:
• Is my income currently adequate to cover higher mortgage payments if interest rates go up after the initial fixed term of 3, 5, 7, or 10 years?
• Will I be taking on other sizable debts, such as a loan for a car or school tuition, in the near future?
• How long do I plan to own this home? (If you plan to sell soon, rising mortgage rates may not pose the problem they do if you plan to own the house for a long time.)
• Can my payments increase even if interest rates generally do not increase?
• If you believe that your client may benefit from an ARM, contact an American Home Free Mortgage loan professional to learn about the variety of options that are available.

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