One of the first choices a homebuyer will need to make is whether you want a fixed-rate or an adjustable-rate mortgage loan. The bulk of loans will fit into one of these two categories, however, there is a third option that will allow you to "hybrid" the two.
An adjustable-rate mortgage, (ARM): The interest rate of the mortgage adjusts periodically based on market conditions. For example, your payment will go up if rates go up and go down if rates go down. Fixed-rate Mortgage: Unlike an adjustable-rate mortgage the interest rate is set at the time you take out the loan and will not change. Fixed-rate home loans can be 10, 15, 20 or 30 years. 30-year fixed is the most common because it allows your mortgage payment to be the lowest.
ARM's feature an initial fixed interest rate for a certain amount of time and then become adjustable based on the index and margin for the remainder of the term. Standard fixed periods of 3, 5, 7, or 10 years are typical.
An ARM is a good product if you are only planning on staying in your home for say 3, 5 or 7 years. You don't necessarily need a 30 year insurance policy to live in a house for 5 years. ARM's can save you money over short periods of time and also be a good tool to pay off a loan faster. Give us a calL and we can see if an ARM is right for you, especially if you are in looking in: Macomb Township, Clinton Township, Chesterfield Township, Harrison Township and St. Clair Shores.