What is an Adjustable Rate Mortgage?

When you are shopping for a home, you have a variety of options available to help finance your purchase. The most common loan product is a fixed rate loan, where you lock in a set rate for the duration of your loan, whether that is 15 years, 30 years, or some other term length. Mortgage rates have been increasing in recent months as a result of inflation, and because of this many people are searching for additional options beyond the standard fixed rate mortgage. 

One popular financing option is an Adjustable Rate Mortgage (ARM). This loan product is similar to a standard fixed rate, but the mortgage rate can adjust after a set period of time. While this may sound like a less desirable option initially, there are many positive aspects that should be considered before deciding whether or not an ARM is a good fit for your financial situation. ARMs often have lower down payment requirements, reduced mortgage insurance payments, and can even be used to finance up to 95% of the appraised value of the home you are purchasing if you are an eligible borrower. 

The graphic below provided by Investopedia gives you a great overview of some of the additional differences between fixed rate and adjustable rate mortgages.

With a variety of factors at play, it is a good idea for you to sit down with an expert mortgage professional to help weigh your options. They can help guide you through the process and give you advice to help make the best financial choice for your situation and goals. If you are looking for a mortgage professional who can help you, give us a call today!  We would love to put you in touch with one of our trusted partners in the industry. 
 
For more information on the home loan process, take a look the financing section of our website here!