Real Estate Word of the Day: Adjustable-Rate Mortgage
An Adjustable-Rate Mortgage (ARM) is a type of home loan with an interest rate that can change periodically. Unlike fixed-rate mortgages, where the interest rate remains constant throughout the loan term, ARMs have an interest rate that adjusts based on market conditions.
Typically, an ARM starts with a lower interest rate for a set initial period (ranging from a few months to several years), after which the rate can adjust at pre-determined intervals. These adjustments are usually tied to a specific financial index, such as the U.S. Treasury bill rate.
Advantages of ARMs in Real Estate
One of the most attractive features of ARMs is their lower initial interest rates. This can make homeownership more affordable in the early years of the mortgage, allowing buyers to qualify for larger loans or save on monthly payments. If you plan to sell the property or refinance before the adjustable period begins, an ARM can be a cost-effective option. The lower initial rate means significant savings during the initial period. In a declining interest rate environment, your mortgage payments could decrease during adjustment periods, potentially saving you money over the life of the loan.
Looking to buy or sell your home on Staten Island? For all your real estate needs, look no further than Tom Crimmins Realty! Give us a call at (718) 370-3200, and we can provide you with professionally-trained agents who are flexible to all that you’re looking for!
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