Four Situations When an Adjustable-Rate Mortgage May be Right For You

Are you struggling to make your dream of homeownership a reality? Adjustable-Rate Mortgages, or ARMs, could be the answer you’re looking for. With initial fixed interest rates that are often lower than those of traditional mortgages, ARMs can give you the edge you need in a competitive housing market. If you find yourself in any of the four situations outlined below, it may be worth exploring the benefits of an ARM.

1. Having a hard time purchasing your first home?

Adjustable-Rate Mortgages are a popular product for first-time homebuyers looking to afford a home with lower starting interest rates. ARMs get you a competitive offer in the purchase marketplace, with the security of knowing your rate is locked in for that initial fixed rate period. When it comes to saving for that daunting down payment and closing costs, ARMs may offer lower closing costs than fixed-rate products. Taken in tandem with Northeast Credit Union’s low or no down payment programs, “some of our Adjustable-Rate Mortgage products can be combined with our Home 97 and Home 100 purchase loans, which is a fantastic combination that allows buyers to get into homes with either a no or low-down payment” according to Chris Saucier, Vice President of Mortgage Lending at Northeast Credit Union.

2. Planning to move or house flip?

Most mortgages do not last the full 30 years. According to the National Association of REALTORS® (NAR), buyers only expect to stay in the home they purchase for about 15 years. If you’re looking for a “for now” home, not a “forever” home, you can work on moving out before the mortgage rate adjusts. Moving before the initial fixed interest rate period ends, or after the initial adjustment, allows you to take advantage of the savings on the payment and interest before you leave. If you build up equity in that period, it gives you the opportunity to resell in a competitive market.

3. Planning on paying off your mortgage early?

If you plan to pay off the mortgage within an ARM’s initial fixed period, you can take advantage of the lower interest rates while they stick around. You might want to consider applying what you save in interest towards repaying the mortgage, to help build equity faster.

4. Are you okay with a bit of uncertainty?

It’s possible that interest rates could go up or down after a loan’s introductory period. The good news is that ARMs now have caps on the rates and payments that limit how much the rate and payment can increase over the life of the loan, which protects you, the borrower, from payment shock. However, it is important to recognize that you may not be comfortable with the possibility that rates could increase. Recognizing your own risk tolerance level and considering all the resources available to you is a key part of making this decision. Luckily, you don’t have to make that decision alone.

Our Mortgage Specialists are the key to getting you home with the best mortgage that meets your unique needs and is always serviced in-house by Northeast Credit Union. Give us a call at 888-436-1847 (select option 4), or get pre-qualified and one of our Mortgage Specialists will reach out to discuss what options are best for you. If you’re considering getting an Adjustable-Rate Mortgage, be mindful that terms, rates, and caps vary by lender.