With Adjustable-Rate Mortgages on the Rise, When Should You Say YES to an ARM?

June 10, 2022

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With rising interest rates and continued housing appreciation, many borrowers are concerned about missing out on homeownership due to overall affordability, leaving them searching for any competitive advantage they can find. As a result, mortgage lenders are seeing an increase in Adjustable-Rate Mortgages (ARMs).

According to the Mortgage Bankers Association, demand for ARMs has surged to a 14-year high, with the loans now making up almost 10 percent of mortgage applications (compared to just 3% at the beginning of 2022). And though an ARM can help with affordability concerns, protect future equity opportunities, and result in years of predictable, low mortgage payments, it also comes with risk –especially for eager first-time buyers who might not understand just how much their payments can increase over time as rates change.

So, when is an ARM the right choice and who should consider applying for one?
  • Buyers planning to move or upgrade in the next few years
  • Buyers who will pay off the loan in a few years, perhaps following retirement or inheritance.
  • Buyers who can afford to make extra principal payments, which would help lower the monthly payments even if rates rise.
  • Buyers who fully understand how much their payments can increase and can afford the highest potential monthly payment over the loan’s lifetime.
 
Even if you fall into one of the above categories, it’s still important to have a mortgage lender crunch the numbers to help you weigh all of your options. So, if you are considering saying YES to an ARM, contact us today by filling out the form below so we can review the risks and determine if it’s your best move.

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