bluecollardollar: on adjustable rate mortgages

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on a call to ARMs: adjustable rate mortgages

Three things that make these loans attractive for some (not all) buyers.
One: You can save the money you would have spent on the mortgage.
Two: You don't plan on spending much time in the house (future plans might mean a job offer in another city, beginning a family, believe it is cheaper than renting).
Three: You can buy more house (which can be a bad thing if you buy too much more!).

In the current interest rate environment, the adjustable rate mortgage is cheap indeed. The interest rate is based on a mathematical formula which uses the one-year Treasury note as the basis. And this is very low right now.

1-Year Adjustable Rate Mortgage
This is a 30-year loan in which the rate (and therefore your monthly payment) changes every 12 months on the anniversary of your loan. This loan is considered quite risky because your payment may change significantly from year to year.

3-Year Adjustable Rate Mortgage
This is a 30-year loan in which the rate (and therefore your monthly payment) changes every 3 years. This loan, while risky, is safer than the 1-Year Adjustable Rate Mortgage only because it does not adjust as frequently.

5-Year Adjustable Rate Mortgage
This is a 30-year loan in which the rate (and therefore your monthly payment) changes every 5 years. This loan is a nice compromise between shorter term Adjustable Rate Mortgages and Fixed Rate programs.

3/1 Adjustable Rate Mortgage
This 30-year loan offers a fixed interest rate for the first 3 years and then turns into a 1 Year Adjustable Rate Mortgage for the remaining 27 years of the loan.

5/1 Adjustable Rate Mortgage
This 30-year loan offers a fixed interest rate for the first 5 years and then turns into a 1 Year Adjustable Rate Mortgage for the remaining 25 years of the loan.

7/1 Adjustable Rate Mortgage
This 30-year loan offers a fixed interest rate for the first 7 years and then turns into a 1 Year Adjustable Rate Mortgage for the remaining 23 years of the loan.

10/1 Adjustable Rate Mortgage
This 30-year loan offers a fixed interest rate for the first 10 years and then turns into a 1-Year Adjustable Rate Mortgage for the remaining 20 years of the loan.

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