As mortgage rates continue to rise, adjustable-rate mortgages (ARMs) have reached a 14-year high. Redfin reports that homebuyers can save an average of $260 per month if they purchase a home with ARMs instead of a traditional fixed-rate loan. This would save more than $15,000 over the first five years of the loan.
ARMs give homeowners lower rates for a fixed term of five, seven, or ten years. After that, the rate changes depending on market conditions.
Analysts point out that ARMs are best for those planning to stay in their homes for less than the term of the loan or can meet the higher payments when they come due.