Kelly Broaddus | eXp Realty | 888.446.5602 | Contact Kelly
Here’s what you need to know about adjustable-rate mortgages.
Today I want to talk to you about adjustable-rate mortgages, also known as ARMs. Some of you may know this already, but before 2008, I was a loan officer, so I have plenty of experience with ARMs.
Typically, ARMs are popular when interest rates are higher. Since our current interest rates are so low, we don’t currently see them as much as we used to. The basics of how they work are that you start your mortgage out with a lower rate, then it “adjusts” after an agreed-upon time. You may hear ARMs referred to as “seven-ones” or “five-ones," and these names are just a way to say what the lower interest rate is and how long it will last. For example, a “seven-one” will have a low rate fixed for seven years.
"Usually, people get an ARM if they are only going to stay in a house for five years or so."
Talk to your lender and find out if an ARM is right for you. Usually, people get an ARM if they are only going to stay in a house for five years or so. This way, they can move before the higher rate kicks in. These loans sometimes come with prepayment penalties, so make sure you know what you’re getting into before you sign. You’ll also want to ask about which financial index your ARM is tied to since some are more punishing than others.
That’s a quick snapshot of ARMs, but if you have any further questions, don’t hesitate to call or email me. I am always happy to help!