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As of May 2024, the average annual percentage rate (APR) for a 30-year-fixed-rate mortgage was 7.41%. Looking for a little breathing room? An adjustable-rate mortgage could be your answer if you’re:
Having trouble buying your first home because you don’t have enough income to cover the monthly payment due to high interest rates.
Looking to invest in a starter house that could potentially create more wealth for you to buy your dream home.
ARM interest rates start low, then change as market interest adjusts. Generally, a 5/1 ARM gives you five years of lower payments before the interest rate goes up, letting you make repairs, sell and create more wealth for yourself.
Advantages of an adjustable rate mortgage vs fixed
Lower initial rates: ARMs typically offer lower initial interest rates compared to fixed-rate mortgages. This can result in lower initial monthly payments, which can be advantageous if you plan to sell or refinance the property before the rate adjusts.
Rate adjustment limits: Most ARMs have caps on how much the interest rate can increase or decrease at each adjustment period and over the life of the loan. This can provide a level of protection against significant rate hikes.
Potential for lower long-term costs: If interest rates remain stable or decrease over time, an ARM could end up costing less in interest over the life of the loan compared to a fixed-rate mortgage.
Qualifying for a larger loan: Because the initial payments are lower, you may be able to qualify for a larger loan amount with an ARM than with a fixed-rate mortgage. This can be helpful if you’re buying a more expensive property or looking to keep your initial payments low.
Is a 5/1 ARM popular?
One of the most common adjustable-rate mortgage loans is a 5/1. The “5” refers to the number of years you have a fixed-rate on your loan. The “1” refers to how often the interest rate can change after that.
With a 5/1 ARM, you can secure more money to get the home you want. With prices of homes going nowhere but up, this loan is perfect if you plan to sell before the initial five-year period ends to buy another, larger home or a property in a more expensive area.
Contact us about ARM interest rates
A team of experienced, local mortgage professionals are waiting to help you get started.
