January 14, 2012
Adjustable rate mortgages
Adjustable rate mortgages (ARM) are generally fixed interest rates for a period of time and then become adjustable. Generally speaking the introductory interest rate for an ARM loan will be lower than a fixed rate mortgage. This is done in order to lower initial payments and allow people to take out larger mortgages in the USA, or give them smaller payments for the introductory period. This is attractive to people who may know that their income will be increasing over that period of time. Whether or not to choose an ARM or a fixed rate mortgages in the USA for Canadians has been debated for as long as there have been ARMs. Though people feel strongly in both camps, simple mathematics can assist you in determining which mortgages in the USA for Canadians is best for you and your personality. Your personality? Yes. Some people are not comfortable with any uncertainty in their lives. The idea of having an uncertain mortgage payment in the future may cause them more stress than the money they are saving is worth. Therefore, factor your own comfort level into the equation. Generally speaking, ARMs are 2, 3 or 5 years, though they can be longer or shorter. At the end of that period your interest rate will become variable unless you sell your home or refinance. If you think that the likelihood of your selling or refinancing within the period of the ARM is strong, than the lower interest rates of the ARM loan will be of great benefit to you. If you think it is unlikely that you will sell or refinance within that period, then you may not benefit from an ARM.
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