What is Adjustable Rate Mortgages? It’s Advantages.

April 21, 2009 - PRLog -- Comparison of Adjustable Rate mortgage with Fixed Rate mortgage
The main difference between the adjustable rate and the fixed rate mortgage comes down to the interest rate and the way it affects monthly payments. Those seeking stability and control over their budget would choose a fixed rate mortgage.  Each month the payment will be the same, even though the amount of interest to principle will vary.  Unlike the adjustable mortgage, this homeowner will see no benefits when the interest rates drop in the market.  The adjustable rate mortgage will reflect changes in the market, and while decreases are favorable, rises in interest could push the mortgage payments out of the reach of the homeowner. The Adjustable rate mortgage does allow for low interest rates  and payments at the beginning making it easy to obtain large amounts, and it is also good for those who will not be staying in the home long enough to see a rise in the interest rates.

Managing Adjustable Rate Mortgages
As mentioned earlier, ARM mortgages (http://www.usloanz.com/adjustable-rate-mortgages.php) are great because they offer an introductory period of low payments and they allow the borrower to qualify for larger loans without which they might not be able to afford their dream house.  If you are planning to stay in your home just a few years, you can take advantage of these super low rates and payments before they start to rise.  If interest rates are currently high and trends show they will begin to steadily fall, then an ARM can mean continued low interest rates that will fall into your budget nicely.  However, if the trend past your introductory period shows that rates will steadily rise, then you might need to set aside more money each month for your monthly mortgage payment, or start thinking about refinancing your loan.  The key is to keep an eye on the market trends to see when it would be ideal to get a mortgage, or if you have one, when it is best to refinance.  Build a relationship with your lender and work together to decide which rate type best suits your needs.

Adjustable Rate Mortgage Benefits

Several benefits arise from adjustable rate mortgages
-   Low initial payments fixed for up to ten years
-   Starting costs of this type of loan are cheaper at the beginning  than the fixed rate mortgage
-   When rates drop so do your monthly payments
-   Ideal for those who plan to move within a few short years before rates rise
-   No need to refinance if mortgage rates remain low over time