Ready to arm a good idea?

In deciding on a mortgage for housing, one of the most common options to consider other than a fixed rate loan is an ARM loan. The ARM is an acronym for the mortgage at a variable rate. With this product, a starting rate is fixed for a certain period and then when the time is up, the rate will be adjusted to an index and a predetermined margin. This period can be anywhere from 1 month or 10 years, and may reflect principal and interest or even interest only payments. The adjustment results in the mortgage payment increases or decreases. There is also a cap on how much the interest rate can go up or down.

Many people are now afraid of ARM loans and automatically consider only a fixed rate loan applying for a mortgage. According to the market, this philosophy is sometimes the most economical route. But many times it may be worth your time to consider an ARM loan.

In the last year or so, there was not no real discernible advantage to consider an ARM over a fixed rate loan. The rates were comparable. But recently, the rates in general have crept upward and by comparing the rate ARM may have a healthy edge.

When I take a loan application, I ask my clients what their future plans. Only gonna be in town for two or three years? Do you work for a company that often replace? Do you raise your family anytime soon? The answer yes to any of these questions is a trigger for me this loan as an option ARM. The average home buyer remains in only 7.5 years in their home. I recently had a client who knew she would be in town for only 3-4 years. The difference between a fixed rate and ARM rate was .375%. The ARM rate is fixed for 5 years before any adjustment would occur. Stupidity.

There are a myriad of mortgage products out there for the consumer. Ask questions of your loan officer, and most importantly, you can expect that your loan officer asks questions of you. And if you can not sleep at night because you know that one day that the ARM loan can adjust, just remember one thing. You can always refinance your loan when the time comes. Now, get sleep.