What are adjustable-rate mortgages - and how do you know if one is right for you?
What you need to know about adjustable-rate mortgages
- Adjustable-rate mortgages (ARMs) feature interest rates that can fluctuate over time, unlike fixed-rate mortgages which maintain a constant rate.
- Initially, ARMs often offer lower interest rates than 30-year fixed-rate mortgages, making them attractive to some homebuyers.
- The interest rate on an ARM is tied to a broader index, meaning monthly payments can increase or decrease after the initial fixed-rate period ends.
- Experts advise potential borrowers to consider how long they intend to stay in the property and their comfort with payment uncertainty before opting for an ARM.
- While ARMs may suit those planning to move before the introductory rate expires, the Consumer Financial Protection Bureau warns against assuming future refinancing or property sale will be feasible.