Although financial experts usually advise buyers to avoid adjustable-rate mortgages like the plague, there are a few instances when choosing this type of home loan over a fixed-rate mortgage can actually be beneficial. If you’re buying a house in the near future and you don’t know which type financing you should be looking for, here are a few reasons why you might want to consider an ARM.
1) You’re expecting a promotion. If you’re anticipating an increase in your annual income over the next few years, it could behoove you to take out an adjustable-rate mortgage on your new home. You’ll be able to save money on your low initial payments, and when your interest rate starts to increase, you’ll have the resources to handle it.
2) You don’t plan on living there for long. If you’re buying a house that you don’t plan to inhabit for longer than five years, an adjustable-rate mortgage is actually a better option than fixed-rate financing. As long as you put your home up for sale before the fixed-interest period expires on your ARM, you’ll end up paying much less than you would have at a higher permanent rate.
3) You want to attack your mortgage. Adjustable-rate mortgages can also be attractive to homeowners who want to aggressively pay off their homes. If you’re determined to own your house in half the time your loan period dictates, then you can use the low initial interest rates of ARMs to your advantage. Keep in mind, though, that paying off a house in seven years or less isn’t a viable option for many homeowners.
Adjustable-rate mortgages aren’t right for everyone buying a house, but there are definitely times when they have an edge over fixed-rate financing. If you find yourself in any of these scenarios and want to know if an ARM is right for you, contact your loan officer today. If you’re smart about it, you can save yourself thousands of dollars with one of these home loans.