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I’ve owned 2 houses, both with a fixed rate. Why do people get an adjustable rate? I never understood the risk. Is it easier to qualify for one? Do you not need to put as much down?
Thanks for the help.

4 Thoughts on Why get an adjustable rate mortgage?
  1. Reply
    February 4, 2014 at 3:42 am

    The only reason to get an adjustable rate mortgage or an interest only mortgage is if you are planning to sell and move in 5 years.. sure, in a market 5 years ago, it was great! Mortgage payments were $ 800 a month.. equity was rising at a rapid rate.. but then boom.. the market crashed and people got stuck in foreclosures because their mortgage went up to $ 1,800 a month instead and then they couldn’t sell it because of the competition of homes for sale. There is your risk. These are the worst type of loans and I don’t advise anyone in doing them. It isn’t easier to qualify for one at all.. the payments just appear lower at first. Best Wishes.

  2. Reply
    Sarah N
    February 4, 2014 at 4:25 am

    A long time ago, when interest rates were much higher than they were now, an ARM made sense because the interest rates were more likely to go down than up. With interest rates so low, it makes much more sense to go for a fixed rate. But ARMs are still offered as a way to get people into more house than they can really afford right now– they offer them a low introductory rate, which balloons after a certain amount of time. If you know with good certainty that your income will be rising or you’ll be moving or refinancing before the rate goes up, it makes sense as a way to get your foot in the door of home ownership.

  3. Reply
    chris p
    February 4, 2014 at 4:41 am

    The rates are lower than fixed.

    If you do not plan on staying in the house for several years, the lower beginning rate saves money and reduces the principal faster because more money goes to actual borrowed amount.

    If inflation stays low, the interest rate can remain very low or increase at a nominal amount.

    Getting the adjustable rate is not easier, the appeal is the beginning payments are lower than fixed rate mortages. Which is perfect for those with increasing wages over time.

    Hope this helps

  4. Reply
    Quicken Loans
    February 4, 2014 at 4:54 am

    Getting an ARM is not any easier to qualify for. The attraction is in the rate – the rates on ARMs are typically lower than fixed rates.

    It really has to do with your goals for the home – if you plan on selling within 7 years, an ARM could save you money. If you plan on staying, choose a fixed.

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