When it comes to buying a home, there are so many different factors to consider, and one of the most important choices to decide on is what type of mortgage to get and what type of interest rate to pay. By choosing an interest rate that is most suitable for your unique situation, you can end up saving a great deal of money in the long run. An adjustable rate mortgage is one type of financing option that could be beneficial for certain homebuyers. If you are interested in buying a home in Mount Pleasant, South Carolina, and have questions regarding your mortgage options, Lucey Mortgage Corporation can help. Read on to learn more about financing a home with an adjustable rate mortgage.
How Do Adjustable Rate Mortgages Work?
The mortgage interest rate of an adjustable rate mortgage, (or ARM), changes periodically over time, and either decreases or increases throughout the entirety of the loan. At the beginning term of an ARM, the interest rate amount remains the same at a fixed rate for a specific period of time before it fluctuates, and this interest rate is usually lower than that of a fixed rate mortgage. After the specified fixed rate time period ends, the interest rate begins to alternate depending on current economic benchmarks like the adjustable rate mortgage margin. If the interest rate that is associated with the adjustable rate mortgage increases, a borrower will be required to pay more money, however, there are maximum limits set in place intended to help prevent borrowers against drastic interest rate increase costs.
The Benefits and Possible Downsides of an Adjustable Rate Mortgage
Obtaining an adjustable rate mortgage can be very advantageous for some borrowers, however, it may not make economic sense for others depending on the situation. One major benefit to an ARM is that the monthly mortgage rate will be lower for a borrower during the initial fixed rate period, which could help save a significant amount of money, especially if a borrower is able to pay off the mortgage quickly during that period. If a borrower plans on relocating after a few years after buying, they could potentially pay off the entire mortgage before the interest rate increases. Some possible drawbacks to an adjustable rate mortgage are that a borrower may have to pay higher mortgage payments if the interest rates increase, and they also tend to have complex guidelines for borrowers.
Choosing the Best Mortgage For Your Situation
In certain instances, financing a home with an adjustable rate mortgage can save borrowers a great deal of money. If you are located in Mount Pleasant, South Carolina, and want to determine the best mortgage for your situation, contact Lucey Mortgage Corporation today for a consultation.