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Are adjustable-rate mortgages worth it?

Posted on Monday, January 6, 2014 at 10:25:09 AM

When it comes to residential financing, homeowners have a few options. One of them is the adjustable-rate mortgage, or what is now extremely popular today - the hybrid. 

These types start with a fixed interest rate for a set amount of time, then switch to an adjustable one. While many potential homebuyers may be worried about the associated risks, these options could be perfect as mortgage rates creep higher.

According to U.S. News and World Report, hybrid ARMs aren't as dangerous as the ones in years past. While it is still necessary to gamble that rates won't be too high when the fixed period expires, overall the borrower could be saving hundreds each month on their residential financing payment. Ideally, a person can pay off or refinance before this time is up, which would reduce the risk altogether.

ARMs have become more popular, The Los Angeles Times reported. They could be a reasonable choice for first-time buyers, or those who will sell again before the fixed-rate period runs out. Borrowers might end up with a mortgage rate a full percentage point lower than a traditional 30-year fixed-rate one for a period of five to 10 years.