Arizona Adjustable Rate Mortgage
Adjustable rate mortgages (ARMs) are more of a specialized mortgage product. An ARM typically has a lower interest rate than a fixed mortgage in the beginning, but that's all that you can be sure of.
Lending institutions base their the interest rates on an index, usually U.S. Treasury securities. Treasury security rates are set by investors. As these securities are bought and sold on the open market the interest rates fluctuate. This is why your ARM fluctuates.
An ARM is usually locked in for a certain period of time. It may be 1-year, 3-years, 5-years, or something different. These are just the most common. Then what typically happens is that once per year the interest rate on your loan adjusts every year after that. It might go up and it might go down. One thing is for certain, when rates are at an all time low, they are going to go back up. If you have an ARM, when the rates go back up your payment goes up.
Your mortgage broker will be asking you a lot of questions when you initially inquire about a loan. They should be asking you how long you intend to stay in the home. This is because the length of staying in a home is a major factor in deciding to use an ARM or a fixed rate mortgage. If the rate stays fixed for 3-years and you plan on moving in two years, then you might as well go with it. If this is the home of your dreams and you don't ever plan to move, then why risk being at the mercy of the ups and downs of the interest rate market?
I have used fixed and adjustable mortgages for the Arizona homes I have purchased. I think they both have their place. ARMs just have more risk involved. If you are using an adjustable rate mortgage be certain you can afford your payments if it adjusts upward.
Don't buy a large house that you can only afford because of the initial adjustable rate. We don't want you frantically calling to sell your home because can't afford your payments.
There is too much information about an adjustable rate mortgage for us to cover in our mortgage section, but we can put you in touch with fantastic mortgage professionals if you are considering this type of loan.
In fact if you want to send an email to a mortgage broker to answer any questions you may have, you can contact a mortgage professional here.
For information on other types of mortgages, return to our
mortgage section to find what you are looking for.
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