Mortgage Blog
All About Adjustable-Rate Mortgage (ARM)
May 14, 2024 | Posted by: Sarabjit Dhuna
Adjustable-Rate Mortgage is payment that changes with the prime interest rate. Adjustable-Rate Mortgage is also called Floating Mortgages.
There are two types of Variable Mortgage rate 1) Adjustable-Rate Mortgage and 2) Variable-Rate Mortgage.
1) Adjustable-Rate Mortgage: -
It has Variable or Floating payment that can go up and down depending on the prime rate. Principal payment will remain the same.
2) Variable-Rate Mortgage: -
It has Fixed payment, but interest rate can go up and down depends on prime rate. In addition, Principal payment can go up and down to affect amortization.
Adjustable-Rate Pros : -
- If rates go decrease, then you can save more money
- If rates increase, then mortgage term and balance will stay on track.
- There is no renewal or refinance risk in Adjustable-Rate
- There is no trigger risk as well
Adjustable-Rate Cons: -
- If rates go up then you have to pay more monthly payment
- Adjustable-Rate does not provide flexibility than fixed-rate mortgage.
Conclusion: -
- Borrowers have many options in the market to finance their home or property. You can opt for an Adjustable-Rate or fixed-Rate Mortgage. Adjustable-Rate can give you the option to save more when the prime rate decreases. However, when the rate goes up you have to pay more monthly payment.
If you have any questions regarding Mortgages, then you can reach out to Sarabjit or visit Centum United website.
If you are looking to buy Pre-construction condos or home, then you can visit our website for latest projects.
