An Adjustable-Rate Mortgage (ARM) is a type of loan whose prevailing interest rate is tied to an economic index (like one-year Treasury Bills), which fluctuates with the market. The three most popular types of ARMs are one-year ARMs, which adjust every year, three-year ARMs, which adjust every three years, and five-year ARMs, which adjust every five years. When the loan adjusts, the lender tacks a margin onto the economic index rate to come up with your loan’s new rate. ARMs are considered riskier than fixed-rate mortgages, but their starting interest rates are generally lower than a longer-term rate. Learn more about ARMs and other mortgage options here.
Refinancing When Interest Rates Are Climbing
Many homeowners who have adjustable rate mortgages are closing watching the rising mortgage rate. If you have a great rate, you should wait as long as possible to refinance. If you start paying down your loan quickly, you can help avoid a huge payment increase when it is time to refinance.
Ilyce Glink on WSB Radio – December 4, 2005
Ilyce discusses tax decisions you need to make before the end of the year. Ilyce offers callers personal finance advice and real estate advice -- on topics ranging from increasing interest rates on adjustable rate mortgages to dealing with a lump sum retirement.
Buying A Home: Think Through Financing
Home buyers, particularly first-time buyers, who ignore the emotional quotient of a house deal, can end up feeling frustrated with the process and angry at the pace of the deal. Taking some time to think through the deal, including the financing part can help. Aside from thinking about financing when you're buying a home, you can plan out how you're going to cope to help keep frustration and anger in check.
Option ARM Mortgages Lower First Payments
A first time home buyer is looking for a home worth 10 times their income. She was most likely approved for an Option ARM mortgage. An option ARM is an adjustable rate mortgage that starts out with an interest rate as low as 1 percent. The loan allows the borrower to pay an artificially low interest rate for the first five years, or until you owe 110 percent of the loan amount. An option ARM might be right for some people, but it's important for borrowers to understand all the terms of the mortgage loan.
Time To Switch To A Fixed Rate Mortgage
Many homeowners with adjustable rate mortgages (ARMs) are growing concerned that interest rates might increase and that they'll be stuck with a high-interest mortgage. One option is to refinance the adjustable rate mortgage and switch to a fixed rate mortgage. But is that a smart move? The question you have to ask yourself is how much more you're going to pay by refinancing now.
ARMs vs. Fixed Mortgages
"Shopping around" means calling a bunch of different kinds of lenders and going online to check out rates, programs, fees and other charges and is the best way to get started when searching for a home loan. If you pull a copy of your own credit and ask the lender for rates based off of your score, you can get accurate quotes and not worry about inquiries on your credit history. Shopping around for the best rate, terms and lender is one of the more important things you can do as a consumer.
Converting Variable Rate Loans To Fixed Rate Loans
What's the difference between a variable rate loan and a fixed rate loan? Should I convert my variable rate to a fixed rate? A variable rate loan means that the interest rate will fluctuate over time. Sometimes it will go down and other times it will go up. If you're comfortable with not knowing exactly what your payment will be, but knowing there are some safeguards in place with respect to how much the rate can rise or fall in a single year, then your increased risk tolerance is rewarded with a lower interest rate.
Many Options Available For Mortgage Loans
Do terms like adjustable rate mortgage, 30-year interest rate, and other mortgage loan terminology make your head spin? You are not alone. Know what your options are when shopping for a mortgage so you find the loan that best suits your needs.
Fixed Or Adjustable Rate Mortgage: Choosing The Best Mortgage For You
Fixed rate mortgage or adjustable rate mortgage (ARM) - choosing the best mortgage for you depends on your current situation. Ilyce advises a reader about whether a fixed or adjustable rate mortgage would be the best choice for his particular situation. Adjustable rate mortgages allow you to refinance, and save money as a opposed to a fixed-rate 30 year mortgage.
Considering An Adjustable Rate Mortgage
Using an ARM instead of a fixed-rate mortgage can save a homeowner thousands of dollars. The trick is that you have to be willing to take a small risk that interest rates will eventually rise. Betting that interest rates stay low and using an ARM versus a fixed-rate mortgage can save you thousands and perhaps even tens of thousands of dollars.