Adjustable-Rate Mortgage in Gilbert
Adjustable-rate mortgages come in a broad array of types, with varying term lengths and initial rates. Prospective homeowners come to Pilot Mortgage LLC to explore their options thanks to our extensive product inventory and consistently competitive rates.
Book a consultation with a specialist today to discover the mortgage possibilities available to you. Call our team at (480) 320-2322.
What Is an Adjustable-Rate Mortgage?
An adjustable-rate mortgage, often called an ARM, is a mortgage payment plan in which the interest rates are subject to change each year. Consequently, your monthly payments are subject to increase or decrease.
Due to the inherent risk factor of an ARM, they typically are incentivized with an initial short-term fixed-rate period with a below-average interest rate.
How Does an Adjustable-Rate Mortgage Work?
While there are many types of adjustable-rate mortgages available, the most popular model is called a hybrid ARM.
A hybrid ARM begins with a short-term, fixed-rate period. These periods are usually offered at lower-than-average rates to guarantee home buyers a certain amount of stability and savings. The most common initial period lengths are 3, 5, 7, and 10 years. After this initial period ends, your interest rate will fluctuate each year until your mortgage matures.
What Drives Change in Adjustable-Rate Mortgages?
The interest rate of an ARM changes in accordance with an index. Indexes are essentially economic indicators, and there are many different varieties of them. Your banker or lender will use this index to modify your interest rate at the end of each fixed term.
It’s in the best interest of prospective home buyers to research the type of index associated with their ARM. At Pilot Mortgage LLC, our mortgage consultants are a step ahead of you. When you work with us, we’ll lay out all the information you need to know about your index, so you can better predict and plan your budget each year.
What’s the Difference Between Adjustable Rate Mortgage and Fixed-Rate Mortgages?
While ARM rates experience variances throughout its lifespan, a fixed-rate mortgage will stay at the same rate that was agreed upon at the time its contract was signed.
What Are the Pros and Cons of an Adjustable-Rate Mortgage?
The most appealing advantage of an adjustable-rate mortgage is the fact that your mortgage payments may decrease throughout your term, resulting in significant cost savings. The lower initial period rates also offer cost-saving potential that is not available in fixed-rate mortgages.
However, the disadvantage of ARMs is the flip side of the coin—your payments are liable to increase. Most ARMs feature rate caps that limit the amount your rate can move, however prospective ARM applicants should be financially secure enough to handle some fluctuation in payments.
Is an Adjustable-Rate Mortgage Right for Me?
Ultimately, deciding if an adjustable-rate mortgage is right for you requires some serious strategizing. The flexible nature of an adjustable-rate mortgage means it is possible to save thousands of dollars on your mortgage as a whole. That being said, it’s not a guarantee, and you will need to factor in your savings from the low-cost initial period and how you predict the market to change during the span of your mortgage.
Evalute Your Options for an Adjustable-Rate Mortgage
That’s where we come in. Our agents specialize in mortgage planning. We’ll help you evaluate your options and calculate your payments in all possible situations.
Book your mortgage strategy session with us in Gilbert today!