Hi Pinnacle, Your HomeActions News for Monday, August 06, 2018
Is this email not displaying correctly?
View it in your browser .
Pinnacle Residential Properties
Pinnacle Residential Properties
(781) 237-5000
info@pinnaclehouses.com
555 Washington St.
Wellesley, MA 02482
Friend Me on Facebook Follow Me on Twitter
Our Website
Featured Listings
Our Agents
Property Search
Pinnacle Mobile App
What is my Home worth
Share Save

Adjustable Rate Loans: How Do They Work?

 

Adjustable rate mortgages are loans with variable interest rates that change according to the market rates, as opposed to fixed-rate loans, which guarantee a set rate for the entire period of the loan. ARMs may seem like a great idea some years, but in other years, you may wonder what you were thinking when you agreed to the loan. 

Many financial experts advise home buyers to seek fixed-rate mortgages. The set interest amount makes it easier to calculate monthly payments with no surprises. An adjustable rate mortgage can leave you with unpleasant surprises if the interest rates suddenly soar.

There are some pros and cons to adjustable rate mortgages. As with any financial decision, learn all you can about the topic and weigh the variables carefully before choosing a loan type.

The pros ...

  • ARMs may be good for buyers who plan to sell in a few years. If you know your job requires you to move every five years, an ARM may be worth the risk of interest rates rising, depending on the current rate.
  • Paying off your loan in a short time period may make an ARM better for some homeowners. For those who know they can repay the entire mortgage amount quickly but just need a short-term loan, ARMs may actually save them money.
  • Some ARMs offer a combination of adjustable and fixed rates. These may offer the best of both worlds, depending on market rates. For example, a mortgage may be fixed for five years and then adjust annually.

The cons ...

  • Interest rates may be low now, but that only means they'll rise later. When interest rates rise, your ARM loan rate will rate rise too. Your monthly payments will increase. This may be a hardship for some people.
  • Adjustable rate mortgages may be saddled with a prepayment penalty. This means that if you suddenly come into a windfall and wish to pay your entire mortgage loan, you may actually be penalized for paying it off early.
  • ARMs can be difficult to understand. There are many variables, and you have to carefully read all the fine print to understand the nuances of a particular ARM. Fixed rate mortgages are a lot easier to understand: borrow this, pay that; it never changes.

Adjustable rate mortgages come in and out of fashion, but the truth is that you shouldn't take out such a loan unless you understand the worst-case scenario and how it may impact your financial health. While they are not for everyone, ARMs do offer some advantages, and those who can take advantage of these opportunities may find them useful. Let us know if you want to explore the ramifications of an adjustable rate mortgage compared with a fixed rate mortgage.

 
Share Save

Your Comments

Saved Articles
Comments and Feedback
Refer A Friend
Your Privacy
Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
Powered by
Copyright © HomeActions, LLC All rights reserved.

This email was sent to: info@pinnaclehouses.com

Mailing address: Pinnacle Residential Properties, 555 Washington St., Wellesley, MA 02482