are arm mortgages a good idea

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After all, an ARM will always be priced lower than a 30-year fixed mortgage. So you can see why a customer may think the 10-year ARM is the better choice hands down. But the fact of the matter is that these loans are still adjustable-rate mortgages in fixed-rate clothing.

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One of the key decisions homebuyers and homeowners make is whether to go with a fixed- or adjustable-rate mortgage. Each have benefits and drawbacks, and your budget, housing needs and appetite.

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An adjustable rate mortgage, called an ARM for short, is a mortgage with an interest rate that is linked to an economic index. The interest rate and your payments are periodically adjusted up or down as the index changes.

Are Adjustable-Rate Mortgages Right for You? – AARP – But there are also so-called hybrid ARMs such as 5/1 ARMs and 7/1 ARMs, which are increasingly popular. These loans are a hybrid between mortgages with a fixed-rate term and those with an adjustable-rate period. With a hybrid ARM, the interest rate is xed for the first few years, and after that, the loan adjusts annually until it’s paid off.

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Homeowners who are considering refinancing their mortgages have one advantage to count on – interest rates remain low. Refinancing from a 30-year or adjustable rate mortgage (ARM) to a lower.

Is an Adjustable Rate Mortgage (ARM) a Good Idea? – Although it’s advised that borrowers consider all three factors before deciding between a fixed-rate or adjustable-rate mortgage, lenders like McCue are required to inform every individual of an ARM’s terms and conditions, rates and changes, caps, monthly payment limits, and negative amortization.