An adjustable rate mortgage is easier to qualify for and may be available even to borrowers with damaged credit. Since the initial payments are generally lower, lenders are more likely to approve a larger loan. Also, if the current rates hold steady or drop any, a borrower with an adjustable rate mortgage may come out paying less for the loan than if he or she had a fixed rate mortgage.
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The time between the rate changes of an adjustable rate mortgages are called adjustment periods. These periods can come in increments of one, three or five years, meaning that with the three year adjustable rate mortgage, the interest rate would be subject to change every three years. The risk with this sort of loan is minimalized by caps that work as rate ceilings to keep monthly payments from getting too high. Also, many adjustable rate mortgages can be converted into fixed rate mortgages if the home owner chooses.
An adjustable rate mortgage is an excellent way to fund the purchase of a new home, starting off with low initial monthly payments and low introductory interest rates and are great for those who may move or refinance after a few years and want to save money early on. Fill out our short form today to learn more about the adjustable rate mortgages available.
For those who have served in the military, adjustable mortgages are also insured by the Veterans Administration, and offer veterans one year adjustable rate mortgages with little no down payments and very relaxed qualifying.