Fixed vs. Adjustable Rate Mortgages - part 2
by Ralph Lorens
ARM benefits include:
Initial payments lower due to lower beginning interest rate, usually about 2 percentage points below the fixed rate.
Ability to qualify for a higher loan amount due to lower initial interest rates.
Lower interest payments if the interest rate drops over time.
Interest rate caps limit the maximum interest payment allowed for the loan.
ARM considerations include:
Initial lower interest rate and monthly payments are temporary and apply to the first adjustment period. Typically, the interest rate will rise after the initial adjustment period.
Higher interest payments if the interest rate rises over time.
Take the time to consider very carefully how the benefits and drawbacks of these loan programs affect your financial health. After all, a new mortgage will have a materail impact on your family's lifestyle for years to come.
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