Mortgages – Fixed Rate vs. ARM

WTF is

ARM stands for Adjustable Rate Mortgage. An adjustable-rate mortgage (ARM) has an interest rate that changes with the market.

Fixed-rate mortgages and adjustable-rate mortgages (ARMs) are the two popular mortgage types.

A fixed-rate mortgage charges a set rate of interest that does not change throughout the life of the loan. The 30-year mortgage is the most popular choice because it offers the lowest monthly payment. However, the trade-off for that low payment is a significantly higher overall cost.

An adjustable-rate mortgage (ARM) has an interest rate that changes with the market. ARMs have a fixed period of time during which the initial interest rate remains constant, after which the interest rate adjusts at a pre-arranged frequency. The fixed-rate period can vary significantly—anywhere from 1 month to 10 years; shorter adjustment periods generally carry lower initial interest rates. After the initial term, the loan resets, meaning there is a new interest rate based on current market rates. This is then the rate until the next reset, which may be the following year. ARMs can be complicated so you’ll want to review all the different factors that impact the interest rate changes. ARM mortgages can often be cheap for the first few years that the lower rate is locked in but you will need to be prepared if interest rates rise when the adjustment kicks in.

065. Mastering Mortgages

Podcast

Britny Lawhorn joins The 411k to teach us how to make informed decisions throughout the home-buying process. Buying a home is often the biggest financial decision that a person makes and so it’s important to understand as much as you can about the factors that impact that purchase. In this episode, we are talking specifically about what a first-time buyer should know about mortgages.

063. First-Time Home Buyers

Podcast

Rodney Sinclair, the owner and operator of Sinclair Real Estate Group, joins The 411k to share advice for first-time home buyers. We are seeing a turbocharged housing market right now with prices surging and home on the market selling quickly and far above the listing price. Rodney joins us to share real examples of what he’s seeing in the market right now and how first-time home buyers are staying competitive.