With the different types of mortgage available to Americans, sometimes you can become confused on which one to get. Some may prefer a long-term, fixed interest rate mortgage, while others may opt for a shorter duration. However, there is also one that you might seriously consider. Have you ever heard of adjustable rate mortgage?
What is it?
The main feature of adjustable rate mortgage, according to Investopedia, is that it has no fixed interest rate. Rather, its interest rate varies throughout the entire loan period and often reflects the prevailing conditions of the market. Simply put, its interest rates adjust based on an index or benchmark oftentimes referred to as adjustable rate mortgage margin. Although its initial rate may be fixed for a certain number of months, it will later readjust based on market conditions.
Why choose it?
While some consider an adjustable rate mortgage as a risky proposition, econmortgage.com says that it has advantages you might want to consider. One of these is that you can avail of lower home mortgage rates. This simply means that you will be able to afford a bigger house as compared to a regular fixed mortgage. Furthermore, you will benefit a lot when mortgage rates in the market are falling. While those who availed of fixed rate mortgages worry about a fresh set of fees and closing costs, you relax and watch your mortgage rates and payment fall.
You can save a lot of money, which you can invest in some other ventures to add to your income. Instead of setting aside payment for a fixed monthly rate, you get to save some of that money when mortgage market rates go down.
If you do not intend to live for a long time in one place, then adjustable rate mortgage is the best option for you. There are many other advantages that adjustable rate mortgages have. Perhaps you may want to check them out to see if those advantages are the ones you are looking for in a mortgage.