| AN ARM (Adjustable Rate Mortgage) has several | | | | |
| disadvantages, and they should all be | | | | If you plan on being in your home for over 5 |
| considered before going into a home loan deal | | | | years, the best bet is you want to build |
| with this specific program. If you are on a | | | | equity into your home, which an Adjustable |
| tight budget, then is definitely not for you. | | | | rate mortgage's low payment plan prevents you |
| Payments can increase month to month. | | | | from doing. |
| | | | |
| Payments can vary month to month by a couple | | | | An Adjustable Rate Mortgage is best if you |
| of hundreds of dollars to thousands, | | | | are planning on just investing in your home, |
| depending on your program. Your rate is | | | | and don't plan on staying in it for more that |
| adjusted with inflation. That means when the | | | | 5 years. You are gambling that the home |
| FED increases their rates... your payments go | | | | values will go up, and you can cash out |
| up, up up! | | | | before the program comes due. Millions of |
| | | | people have try playing this game, and you |
| The only way to really win in an ARM program | | | | really don't want to. The simple fact is that |
| is to pray that interest rates go down, WHILE | | | | the financial game is not to be played with |
| your home value goes up. History has show | | | | when you consider it is your family's |
| these two events rarely occur at the same | | | | financial stability that you are gambling |
| time. On one hand if your home values are | | | | with when you choose an ARM home loan |
| going up, that mean sellers are selling at a | | | | program. Think long and hard on how you are |
| higher rate, and buyers are getting hit hard | | | | going and calculate if you will be able to |
| with fees and high interest rates since it is | | | | financially pay a monthly varying payment. |
| a seller's market. If interest rates are | | | | |
| going down, that means there are more buyers | | | | Another disadvantage of an ARM is that you |
| out there than there are sellers. This in | | | | can not set a proper financial budget for you |
| return drives home prices up. Well that's | | | | and your family. Since the next monthly's |
| your idea goal right? Wrong. Notice I said | | | | payment is going to be a guess you could find |
| home prices, not the value of the homes. If | | | | yourself in deep water, in cases of |
| you are buying a $600,000 home, in a | | | | emergency. It is very difficult to create a |
| neighborhood that the average value is | | | | long term financial budget on an ARM home |
| 400,000, guess what, you're paying too much. | | | | loan program. |
| Now if you are the seller you are skipping to | | | | |
| the bank with your extra money, but if you | | | | If you are on a tight budget your best chance |
| are a buyer you will soon find that you paid | | | | is to explore a fixed mortgage rate. Most |
| too much for your home, once home values | | | | borrowers feel comfortable with a simply easy |
| level off. | | | | predictable monthly mortgage payment. |
| | | | |
| A huge problem that most borrowers have with | | | | There are several only resources that can |
| an ARM is the 5 year surprise. What's the 5 | | | | help you find a perfect low fixed mortgage |
| year surprise, well when you sign a | | | | rate. Do your research. Make sure the company |
| traditional ARM, you pay as little as | | | | you are dealing is with the Better Business |
| possible for the first 5 years, and no FED | | | | Bureau, A rating with the BBB, and are |
| interest rate is calculated. Then after 5 | | | | reputable. |
| years, the Adjustable Interest Rate program | | | | |
| starts, and now your monthly mortgage | | | | Currently it is time for home owners with |
| payments include the FED's interest rate. So | | | | ARMs, and even fixed rates to start shopping |
| you can potentially be seeing quadruple | | | | for a new lower fixed mortgage rate. Overall |
| monthly payments, and your payments can | | | | mortgage applications for ARMs have declined; |
| continue to increase month after month if the | | | | they have reached their lowest point since |
| interest rate increases. | | | | 2003 of March. |