Adjustable-Rate Mortgage Loan
An adjustable-rate mortgage loan (ARM loan) is a type of loan where the interest rate may change periodically after an initial fixed-rate period. Once this introductory period ends, the interest rate associated with the loan may increase or decrease depending on market conditions, which can impact your monthly mortgage payment.
Understanding Adjustable-Rate Mortgage Loan
An adjustable-rate mortgage, or ARM, is a type of home loan where the interest rate can change periodically after an initial fixed-rate period. Unlike fixed-rate mortgages, the interest rate on an ARM is susceptible to fluctuations based on changes in the market, which can cause your monthly mortgage payments to increase or decrease.
It’s important to note that the term “adjustable-rate” refers to the differences in loan terms, not the type of loan. This means that you can obtain an ARM loan with a Conventional, FHA, VA, or USDA loan type, just like you can with fixed-rate home loans. While an ARM loan may provide lower initial rates than a fixed-rate mortgage, it’s crucial to understand the risks and benefits associated with this type of loan and work with a trusted lender like Global Capital Advisors to make an informed decision.
Features:
- Interest rate can change periodically after the initial fixed-rate period
- Market fluctuations determine the increases or decreases in mortgage rate after the initial period
- Available for Conventional ARM loan, FHA ARM loan, VA ARM loan, or USDA ARM loan
- Lower initial interest rates compared to fixed-rate mortgages
- Potential for lower monthly payments during the initial fixed-rate period
- Potential to benefit from falling interest rates after the initial fixed-rate period
- Potential for higher monthly payments if interest rates increase after the initial fixed-rate period
- Flexibility to refinance or sell the property before the initial fixed-rate period ends to avoid potential rate increases
Frequently Asked Questions
What are the benefits of an adjustable-rate mortgage loan?
An adjustable-rate mortgage (ARM loan) might be a good option for you if mortgage rates in the market are high at the time you are home shopping, or if you plan to live in the home for only a few years. This is because the introductory fixed-rate period of an ARM loan is generally lower than the fixed interest rate of a traditional mortgage. Additionally, if mortgage rates go down, you can benefit from a lower interest rate with an ARM loan.
What are the benefits of a fixed-rate mortgage loan?
A fixed-rate mortgage loan provides a sense of predictability and security, as you always know how much interest you will pay over the life of the loan. In a low-interest rate environment, a fixed-rate mortgage might be the best choice, as it locks in the low interest rate for the life of the loan. If you plan to stay in the home for the entire life of the loan, a fixed-rate mortgage can be a great option.
What are the key differences between adjustable-rate mortgages and fixed-rate mortgages?
The main difference between the two types of mortgages is that the interest rate on an ARM loan can change periodically after the initial fixed-rate period, while the interest rate on a fixed-rate mortgage loan remains the same for the entire life of the loan. ARMs generally have a lower introductory interest rate, but this rate can increase after the initial fixed-rate period. Fixed-rate mortgages provide a sense of predictability and security, as the interest rate remains constant for the life of the loan.
Which type of mortgage loan should I choose?
The type of mortgage loan you choose depends on your individual circumstances. If you plan to stay in the home for the entire life of the loan, a fixed-rate mortgage can provide security and predictability. If you plan to move or refinance in a few years, an ARM loan might be a good option. It’s important to weigh the pros and cons of each type of loan with your mortgage advisor to determine which option is best for you.
These are just a few common questions and answers about Adjustable-Rate Mortgage Loan. If you have more specific questions, it’s always best to consult with your Globus Capital advisor who can guide you through the process.
*The appraised value of the property may influence the loan amount.
**Generally, cash from equity is tax-free. However, this information should not be considered as tax or financial planning advice. Consult a tax advisor for tax-related advice and a financial planner for guidance on improving your retirement plans. Emortgage capital is not associated with any government agencies. The materials presented here are not from HUD or FHA and have not been approved by HUD or a government agency. To be eligible for a reverse mortgage, borrowers must obtain a certificate by attending counseling sessions with a HUD-approved agency. The borrower must be at least 62 years old. Loan proceeds are not considered income and will not impact Social Security or Medicare benefits. However, your monthly reverse mortgage advances may affect your eligibility for certain other programs. Consult a local program office or an attorney to determine how, or if, monthly reverse mortgage payments could affect your specific situation. At the end of the reverse mortgage loan contract term, you may no longer own some or all of the equity in the property subject to the reverse mortgage, and you might need to sell or transfer the property to repay the reverse mortgage proceeds with interest from your assets. We will charge fees for origination, mortgage insurance, closing costs, or servicing for the reverse mortgage, which we will add to the loan balance. The reverse mortgage loan balance grows over time, and interest will be charged on the outstanding loan balance. You retain the title to the property subject to the reverse mortgage until you sell or transfer it, and you are responsible for paying property taxes, insurance, and maintenance. Failure to pay these amounts may cause the reverse mortgage loan to become due immediately. Interest on a reverse mortgage is not deductible on your income tax return until you repay all or part of the loan.
Craig Kaminski
NMLS #: 1417248
licensed by:
E Mortgage Capital, Inc. d/b/a E Mortgage Capital,
NMLS# 1416824
(www.nmlsconsumeracces.org)
Verify your eligibility for Adjustable-Rate Mortgage Loan
Talk to a Globus Capital mortgage advisor now!