What is an Adjustable Rate Mortgage and What Are the Benefits?

Adjustable Mortgage Rates and Their Benefits

If you’re trying to find a loan, especially to purchase real estate, you’ve probably heard of the adjustable rate mortgage. You may be wondering why it would be good for you, or maybe even what it is. Let’s answer a few of your questions here.

What is an adjustable rate mortgage?

An adjustable rate mortgage is actually almost as simple as it sounds. The bank will give you an initial interest rate for your loan, but as time goes on, this rate will probably change. Of course, it’s not just up to the banks to choose whatever mortgage rate they want. The rate will depend on one of several indexes, so the rate can go up or down. Most of these indexes are similar, so it doesn’t make much difference which one the bank chooses, but you should still find out which one your loan will follow and why the bank chose that one.

The benefits

Using an adjustable rate for your mortgage can be very helpful to you. For example, because the bank considers you to be taking the risk when you accept an adjustable rate loan, it will often give you a lower initial interest rate. An adjustable rate loan is great if you think that interest rates are likely to go down, or even stay about the same, over the course of the loan. It also might be a good choice if you don’t plan to hold onto the property for very long.

Are you considering an adjusted rate mortgage? Contact us. We’re experts and can help you with everything that you need.