QandAs: Loans

What are the benefits of an Adjustable Rate Mortgage?

Answer:
The primary benefit of an adjustable rate mortgage (ARM) is the fact that the initial interest rate is much lower

than that of fixed rate mortgages. Starting your home loan off with a low interest rate means that your payments will be low, at least until the first interest rate adjustments.

These types of loans can be particularly beneficial for individuals who don't plan to stay in their homes for very long. If you're likely to sell your home before the interest rate adjusts, you'll enjoy the lowest possible payment during your stay in the house.

Adjustable rate mortgages are sometimes the only options for individuals who do not have the best credit histories. Individuals who can't qualify for conventional loans can often be approved for ARM loans. When an individual who qualifies for an ARM loan makes payments on time each month and improves his or her credit history, it may be possible to refinance to a conventional loan prior to the first interest rate adjustment.


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