As we move farther into 2017 the topic of mortgages is still on everyone’s mind and in this article we are going to move away from fixed-rate mortgages and look into adjustable-rate mortgages or ARMs. Contrary to a lot of popular opinions, it may be a good time to get an ARM loan when everyone wants to push you into a 15-year or 30-year fixed rate mortgage. Not every borrower situation is the same and you really need to evaluate what you are trying to do and what your future holds so that you can see if a 2017 Adjustable Rate Mortgage should be your choice of mortgage program.
If you have ready any of my previous articles this year, you will see that a common topic that is still coming up is the increase in mortgage rates and what is in store for us for the rest of this year and beyond. The fact of the matter is lately we have see a run up in mortgage rates that we have not been witness to in many years and this is where a 2017 Adjustable Rate Mortgage can come into play and protect you from these increasing mortgage rates. Let’s take for example a 5/1 ARM, this means that for the first 5 years your mortgage rate stays the same and after that, your mortgage rate will adjust annually to the market rate plus the margin associated with the arm. In most ARMs, you will get an introductory fixed period from 3 to 10 years and in that time your mortgage works exactly like a fixed-rate mortgage. Once the fixed period ends is when you can see the volatility of the market determine your new mortgage rate. To prevent against your rate adjusting, it might be wise for you to lock in your 2017 Adjustable Rate Mortgage today before the rates decide to go any higher.
As we look more into the fixed-rate introductory period of your ARM, this is where you can see yourself saving a lot of money compared to the current market rates of mortgages. With the money you are saving on a monthly basis with your ARM, it would be wise of you to calculate what you market value payment would be and apply the difference every month to the principal on your loan. This additional amount of principal paid monthly over the first 5 to 7 years can save you a lot of money once your mortgage adjusts down the road. By doing this, you can prevent payment shock when your mortgage adjusts and you will not see an increase of a couple hundred dollars. You may still see an increase with this scenario, but since you have paid down additional principal, it is not as bad as you may think.
Another reason why a 2017 Adjustable Rate Mortgage may be right for you is if you evaluate your plan for the next 3 to 7 years to determine if you will be staying in the home you are purchasing or will want to be moving. If the answer is you intend to move in the short-term, then almost always an ARM is the way to go to ensure your housing expense is as little as possible over the years you are in your home prior to selling it. If you are single and fresh out of college, or intend on using your first home as a starter home, a 2017 Adjustable Rate Mortgage is a great plan for you as you will sell your home before your rate even has a chance to adjust. Another scenario where this will work in your favor is if you move frequently for work and want to purchase a home instead of renting for multiple years. Knowing that you will be out of your home in a few years almost ensures that the right option for you is an ARM.
If you are pressed with a higher than normal debt-to-income ratio or DTI ratio, you will notice that you may not be able to fit into mortgage guidelines going the fixed-rate mortgage route. Since an adjustable-rate mortgage allows you to get a rate that is normally significantly lower than the market rate can save you hundreds per month on your mortgage payment which will lower your DTI ratio as well. This extra $100+ savings per month can mean the difference between a mortgage approval and a mortgage denial. If you are a first-time home buyer or a recent college graduate with an abundance of student loans, then trying to obtain as low a mortgage payment as possible is key to getting into a home to call your own and stop wasting your money on rent.
As I mentioned earlier, a 2017 Adjustable Rate Mortgage may not be the right option for everyone and for the buyers who intend to stay in their homes for a long time and don’t want to deal with their mortgage rates changing, then an ARM is not the right loan for them. However, if you fit into the categories mentioned above, an ARM loan should be your best bet. If you are confident that an ARM is the way you should go, you need to calculate how long of an initial fixed rate term is the best for you to ensure your fixed rate period doesn’t end sooner than anticipated. The worst thing you can do is underestimate your fixed rate term and get stuck with years at an adjustable rate that will more than likely be higher than a rate you lock in today with. If you are looking for a professional who will have your best interests in mind, then you need to call Loan Consultants today where we can weigh your options out for you to ensure the ARM product is right for you. We won’t force you into any loan and will give you the tools and facts for you to make an educated decision. This is one of the biggest purchases of your life and you need to treat it with the importance it deserves. Call us today and we can get you started to home ownership ASAP at 888-900-1020.