Managing your money can be hard, and it's especially hard when expenses fluctuate. For example, if you like to buy lots of presents in the winter or take long vacations in the summer, you have to manage your finances to make that possible. Hi, my name is Molly. As a small business owner and the mom of a busy family, I've had to figure out how to manage a lot of financial ups and downs over the years, and in my opinion, advance preparation and organization are key. If you want tips for managing your personal or business finances, you have come to the right place. I hope that these posts help and inspire you.
Are you looking to buy a home, and wondering if an adjustable-rate mortgage is right for you? If so, it will help to know more about this unique type of mortgage.
ARMs Have Initial Fixed Terms
While the name of an adjustable-rate mortgage implies that the rate changes, be aware that AMRs have an introductory period where the loan is at a fixed interest rate. A shorter introductory period will result in the interest rate being lower as well. Lenders offer a variety of different types of ARMs that have different introductory interest rates, so you'll have plenty of options to pick from.
If you know that you are not going to be in the home for a very long time, then an ARM can be a great way to save money on interest. For example, you may plan on getting married or having kids in the future, and know that you are going to sell to move into a bigger home.
ARMs Have a Cap On Interest Rate Changes
If the mortgage does move into the adjustable-rate period, know there are caps on how much an interest rate can go up and down. This helps protect the lender and the buyer since you know there are limits to the interest rate on both sides. You should look at the maximum that your interest rate can go to so that you know if you can afford those larger payments in a worst-case scenario.
ARMs Can Be Paid Off Early
Worried about what happens if plans change and you end up staying in the home longer? You can always keep the ARM and continue to pay the mortgage based on your changing interest rate. You can always make additional payments in order to shorten the length of the loan and how many years you spend paying the mortgage during the adjustable-rate period.
ARMs Can Be Refinanced
The other option if you plan on staying in the home is to refinance. You can always change your mortgage over to a 15-year or 30-year fixed-rate mortgage if you prefer the predictability of your mortgage payments. If your plans change, know that your mortgage can change as well.
Unsure if an adjustable-rate mortgage is right for you? Reach out to a mortgage lender such as FNCB Bank for more information. They can walk you through the pros and cons of several types of mortgage products so you can make an informed decision.
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