Is an ARM Right for Your Austin Mortgage?
Although they have been vilified in recent years, an adjustable-rate-mortgage (ARM) can be a smart move for your Austin mortgage in some circumstances. ARMs start with a low fixed rate for an introductory period, which is usually lower than a fixed rate mortgage. After the initial time period, the loan adjusts annually based on current interest rates.
There are also hybrids ARMs, which combine features of fixed rate mortgages and adjustable rate mortgages. This type of Austin mortgage starts with an interest rate for a fixed period of time, usually 3, 5, 7 or 10 years. After the fixed rate time period, the loan has an adjustable rate for the remainder of the loan time.
Austin Mortgage Advantages to ARMs
Both a regular ARM or a hybrid ARM have advantages, one of them being that the introductory interest rate can be significantly lower than the market interest rate. For example, a 30 year fixed mortgage could be 4.5% while an ARM Austin mortgage could be 3.1%. Not only are your initial monthly mortgage payments lower, but you can also save significant amounts of money on interest over the life of the loan.
Disadvantages of Austin Mortgage ARMs
One of the biggest disadvantages of ARMs is the unknown. Your Austin mortgage rate will be subject to whatever the going market rate may be at the time your fixed rate ends. At this point, you could refinance or sell. ARMS work the best for homeowners who only intend to stay in the home for the initial mortgage period. If only we all owned a crystal ball!