When to use an Adjustable Rate Mortgage

An Adjustable Rate Mortgage (ARM) can be risky because – as the name implies – the rate is adjustable based on a financial index. Thus, the rate can go up, down or remain the same. However, there are situations where an ARM makes sense.

  • Buying for the short term – Buyers planning to live in the home for 3-7 years.
  • Strong future prospects – Buyers who know their financial future is about to improve.
  • High net worth individuals – Buyers who know they can earn more interest with their than what they are paying in interest on a mortgage.

Experts warn that the worst scenario is for a buyer who can’t qualify for a 30-year fixed to use an ARM to qualify with a lower rate.

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