Why Choose an Adjustable Rate Mortgage?

Riding the market is like riding your favorite rollercoaster at the amusement park. The ride is filled with ups and downs, twists and turns, taking you in unexpected directions. With an adjustable rate mortgage, you agree to take that ride, savoring the dips and riding out the hills.

An adjustable rate mortgage begins with a fixed term of low rates. Once this introductory period is over, you are at the mercy of the market, with a few exceptions. Introductory fixed periods can be as short or as long as you want – with a limit of10 years. Many people choose a lower introductory period because adjustable rate mortgages are often used by homeowners who don’t plan on living in that home for a long period of time.

If you choose an adjustable rate mortgage you do have some protection against radical fluctuations in the market. There are limits to how much your rates can increase over an established period of time. Some protect your rates from increasing a certain amount over a year and even over your lifetime. This way you won’t get stuck if the market is extremely unstable.

Another form of protection for adjustable rate consumers is the option to change to a fixed rate mortgage at a cost. This allows you the freedom to opt out of your plan if the payments get to outrageous.

While you run the risk of incurring above average increases in your loan payments, you also have the luxury of taking advantage of extremely low interest rates without having to go through the rigors of refinancing your home. Choosing an adjustable rate mortgage is a gamble – but a gamble that provides you with protection and options to get out of your loan. If only the tables in Vegas offered such protection.