As 30-year fixed-rate mortgages continue to rise – averaged 4.67percent during the last week in March – adjustable-rate mortgages may be just the answer for some homebuyers. Last week the five-year ARM averaged 3.5 percent.
Of course, ARMs are risker than 30-year fixed-rate mortgages. Once the lock period ends – typically three, five, or seven years – the borrower must pay a higher rate, often – but not always – capped at 2 percentage points over the initial payment for the first adjustment.
Analysts say that ARMs are often chosen for higher-priced homes where the savings can be significant.