When it comes to buying a home and obtaining a mortgage, everyone’s situation is unique. Housing needs and personal finances vary greatly, so it’s important for every home buyer to understand the types of mortgages that are available.

Adjustable Rate Mortgages, or ARMs, generally offer a lower initial interest rate than conventional 30-year fixed rate mortgages. However, after the introductory period, the rate will increase at specific intervals until it reaches a capped amount. Because ARM terms can vary substantially, borrowers should understand several concepts that apply to this type of loan:

  • Frequency of the interest rate adjustments
  • Interest rate Adjustment Indexes
  • Interest rate caps for each adjustment interval
  • Interest rate ceiling over the life of the loan

Mortgage lenders are an important information source for home buyers and prospective borrowers should keep asking questions until they thoroughly understand their options.

So, is an Adjustable Rate Mortgage right for you? Here are several factors to consider:

  • How large of a mortgage payment can you afford today?
  • Could you still afford your monthly payment if interest rates rise significantly?
  • How long do you intend to live in the home? If you plan on living in the house for only a few years, the lower rate ARM might make good sense.
  • What direction are interest rates heading?

Interest rates have been very low for many years. However, the Federal Reserve has given indications that rates will rise in the future. Higher interest rates along with rising home prices can make ARMs a viable option that helps many buyers purchase the home they need.

If you would like to learn more about Adjustable Rate Mortgages – and whether an ARM is the best solution for your needs – contact First Ohio Home Finance today. We’ll be happy to answer any questions you may have. You can also estimate payments and interest for an adjustable rate loan with our ARM calculator.