Adjustable Rate Mortgage And Adjustable Interest Rate Mortgage Benefits

PITTSFIELD, Mass. - Aug. 7, 2013 - PRLog -- Many people don’t understand what an interest only adjustable rate mortgage is, so they don’t know how to look into it. Real-estate-yogi.com is here to help clear up any confusion about the different mortgage types available by sharing its knowledge about it, including:

·         Standard Adjustable Rate Mortgages (ARMs)

·         Fixed Rate Mortgages (FRMs)

·         Interest-Only ARMs

·         Benefits of Each

Traditional ARMs

The basic kind of adjustable rate mortgages are fairly simple. They have low rates that change on a schedule agreed upon at closing. ARMs are attractive to those purchasing a home for the first time, as the interest rates are low. Generally, ARMs start out with a set-rate period. After the introductory period, the changes may start as soon as the first month or not until ten years have passed; check the mortgage agreement carefully.

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Basic FRMs

A standard fixed interest rate mortgage is easy to budget for, as the amount of one’s payment never changes for the life of the loan. This makes it appealing to those who are buying a home for the second time. They’ve already gone the route of and ARM and have learned that it’s more comfortable to know exactly what one’s monthly payment will be. The rates for FRMs are based on current interest rates, one’s credit score, who’s paying the closing costs, and whether one obtains private mortgage insurance or goes through lender-paid mortgage. If prevailing rates are higher at the time one searches for a mortgage, opting for an ARM is the better move until the rates come down.

Understanding the Interest-Only ARM

Adjustable interest rate mortgages are one that has an initial interest-only payment time period. During that time, only the interest that’s been calculated has to be paid. Once the initial time period is over, the mortgage must amortize so that it can be paid off by the finish of its original term. What this means is a steep increase in monthly payments after the interest-only payment time has passed.

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Advantages of Each Mortgage Type

Adjustable interest rate mortgages offer people who only plan to live in a house for a short time to borrow what they need less expensively. FRMs feature constant rates and payments, even if the mortgage rates rise, and they’re easy to understand. Interest-only ARMs are helpful for those with poor credit or who don’t have a down payment. It is up to the homeowner to decide which option is the best for his situation.

 

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