Wednesday, July 15, 2015

Adjustable Rate Mortgages Explained

When it comes to choosing the right loan for your new home at the Lake of the Ozarks, there are many different options. From government loans to privately funded, fixed-rate to adjustable rate, you have a lot of things to consider. Which one is right for you? Read on about adjustable rate mortgages and talk to your mortgage lender at the Lake of the Ozarks to see what options you have for your specific situation.

What is an Adjustable Rate Mortgage? 


An adjustable rate mortgage (ARM) is when the rate of interest is adjusted periodically to reflect market conditions. Your monthly payments can then move up and down as those interest rates fluctuate. Most ARMs have an initial fixed-rate period, followed by a longer period where the rate changes at preset intervals. The interest rates charged during the initial period are typically much lower compared to fixed-rate mortgages.

When Does it Make Sense for an Adjustable Rate? 


Most homeowners that choose an adjustable rate mortgage base their decision on the fact that the initial interest rate is lower than a comparable fixed-rate mortgage. This can make your monthly payments on the same house much lower to start with. Once the fixed-rate period ends, there's the possibility of your interest rate going even lower, so your monthly payments could decrease. However, it could go the other way too and your monthly payments could increase. Interest rates are unpredictable, so you can't predict what you're payments are going to be after your initial fixed-rate period is up. If the home you're purchasing is simply a short-term investment or if you don't plan on owning it for longer than 5 years, an adjustable rate mortgage makes more sense than a fixed-rate.

Types of Adjustable Rate Mortgages


Adjustable rate mortgages come in many different forms, ranging from 1-month ARMs to 10-year ARMs. Obviously each comes with its own risks, so be careful when comparing the different Lake of the Ozarks mortgage options:
  • 1-month ARM: First adjustment after one month, then adjusts monthly
  • 6-month ARM: First adjustment after six months, then adjusts every six months
  • 1-year ARM: First adjustment after one year, then adjusts annually
  • 3/1 ARM: First adjustment after three years, then adjusts annually
  • 5/1 ARM: First adjustment after five years, then adjusts annually
  • 5/5 ARM: First adjustment after five years, then adjusts every five years
  • 5/6 ARM: First adjustment after five years, then adjusts every six months
  • 7/1 ARM: First adjustment after seven years, then adjusts annually
  • 10/1 ARM: First adjustment after 10 years, then adjusts annually
  • 15/15 ARM: First and only adjustment after 15 years

                  Talk to your Lake of the Ozarks mortgage lender today to see if an adjustable rate mortgage is right for you! We'll discuss your specific situation, your plans for the house and how much you can afford in a payment. When it comes to your financing needs, I'm here to help you with the details every step of the way! Give me a call at 573-746-7211 to discuss your options for a home loan at the Lake of the Ozarks!

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                  Michael Lasson
                  Sr. Residential Mortgage Lender
                  NMLS #: 493712

                  2265 Bagnell Dam Blvd, Suite B
                  PO Box 1449
                  Lake Ozark, MO 65049

                  Direct:  (573) 746-7211

                  Email:  mlasson@fsbfinancial.com

                  **The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.

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