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An Adjustable Rate Mortgage
is one of, if not the, biggest money saver for borrowers who use them to
their advantage. This type of mortgage is also known as an ARM mortgage,
renegotiable rate mortgage, a variable rate mortgage.
Each year, borrowers who have taken a fixed rate mortgage have learned that
they have paid much more for their mortgage than they ever should have.
This is due to poor planning, being too conservative in their approach to
a mortgage, or just not having mortgage professional to work with who they
trust to give them honest advice and choices.
There are advantages and disadvantages to an adjustable rate mortgage, but
when used the correct way for the right borrower, the advantages far outweigh
any of the disadvantages.
In this series of articles, I will try to ease those fears of these programs
and give you a feel for all the money saving options that these ARM's or
Adjustable Rate Mortgages are able to offer and the borrowers that will
be able to benefit the most from using an ARM mortgage.
Many borrowers cringe, and rightly so, when they hear "Adjustable Rate
Mortgage" because the only thing some borrowers can see is their mortgage
payment going up.
Definition of an Adjustable Rate Mortgage
"A mortgage whose interest rate will change periodically"
That is the definition, however, most adjustable rate mortgage products
today are not true ARM's, but rather a Hybrid ARM, or a combination of a
fixed rate with an adjustable rate.
A "True ARM" is what most of these borrowers are thinking of when
they cringe. This is an adjustable rate mortgage that changes your payment
every year or even every month in some cases.
"Hybrid ARM's" are a combination
of a fixed rate and a true ARM and come in varieties where the rate is fixed
for the first 1, 3, 5, 7 and even 10 year periods before the mortgage begins
to adjust. Most times these Hybrid ARM's come at an interest rate savings
over a fixed rate mortgage and borrowers who take a long term view of the
situation and plan ahead can often come out ahead.
Summary
An adjustable rate mortgage is a very powerful tool for saving money and
you should always use anything in your advantage to get the best deal possible
for yourself.
However, as with anything powerful, when not used correctly it can be very
costly as well.
The very best solution is to get an honest mortgage professional who will
truly do the best thing for you, listen to the details of your situation
and give you options to choose from while making sure you understand the
advantages and disadvantages of each choice.
This series of articles about ARM's should give you ideas of ways to save
money, but everyone is different. Please call, email or just click on the
chat at the upper left and I will be happy to answer any questions you have.
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