Honolulu Home Loans
An adjustable rate mortgage, or also known as the standard variable rate, is one of the mortgages that are often availed by individuals wanting to buy a home. Based on the latest reports, adjustable mortgages are very popular in the United States. As a matter of fact, out of the 52 million mortgage holders, over 12% chose the adjustable rate mortgage (or ARM). This type of mortgage has never been so popular, and the number of people choosing this type of mortgage is continuously on the rise.
- 1. It has lower costs. This is one appealing feature of the adjustable rate mortgage although this can only be felt after several years like, let’s say, after five years or so. This type of mortgage does not offer any kind of discount. Other mortgage providers offer discounts, but they try to recover the discounts granted on their rates, which means that they make it a point to apply higher interest rate.
- 2. It is a flexible mortgage. There are some mortgages that have lock-in periods as well as penalties whenever a borrower decides to change plans with his or her finances. In an adjustable rate mortgage, these conditions are not present. If you want to immediately shift another mortgage, feel free to do so. You do not even have to worry about getting charged of penalties. This is how flexible this type of mortgage is.
- 3. Payments are based on the current market condition. You can save a lot of money if there is a decline in the rates of interest. The lower the interest rate, the smaller your monthly payments will be. However, the only disadvantage is that when the interest rates rise, then you should expect that your monthly payments will also go up.
Unlike other types of mortgage, the adjustable rate mortgage does not follow certain strict conditions like lock-in period and penalty charges if ever you want to pre-terminate your mortgage, and this is one of the reasons why it has become more and more popular these days. But, as I’ve said, the only disadvantage of this mortgage is when the interest rates tend to go up.