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Is an Adjustable Rate Mortgage right for you?

When you start the home buying process, there are many loan features you’ll need to consider. It’s always best to reach out to a Mortgage Lender and get prequalified before you start searching for the perfect home, so you can explore the best loan options and get an estimate of your monthly payment.

Mortgage experts can help you make one of the biggest decisions right off the bat; whether to go with a fixed or an adjustable rate loan. In a rising rate environment, an Adjustable Rate Mortgage (ARM) could be the most appealing because of its initial lower rates and lower monthly payments.

What is an Adjustable Rate Mortgage?

An ARM has an introductory interest rate that is fixed for a specific period of time, followed by an adjustable interest rate that can increase or decrease over the remaining life of the loan, based on certain market conditions.

United offers 3/1, 5/1, and 7/1 ARMs. What does that mean? The ARM you choose is named for the way it works. For instance, a 5/1 ARM has a fixed rate and payment during it’s first five years. After the initial five years, the interest rate will adjust annually according to its terms, which will change your monthly payment. The ARM’s lower start rate is your reward for taking a risk on a potentially higher rate down the road.

If you plan to buy or refinance your home in the near future, an ARM can help keep your monthly payment low until it’s time to move on from your current mortgage.

How does it differ from a fixed rate mortgage?

A fixed-rate mortgage, such as the most common 30-year mortgage, has a fixed rate throughout the life of the loan making the payment the same unless you choose to refinance to a different loan. If you’re planning to buy your forever home and want to avoid the risk of a potentially higher rate in the future, this may be the best choice for you.

Here are a few questions to ask yourself when beginning this journey:

1. How long do you plan to live in the home you’re looking to buy?
2. How much do you want your monthly payments to be?
3. Are you planning to refinance in the future once your credit score improves?

There are many things you need to consider when you start shopping for a mortgage; various types of home loans, interest rates, and available discounts. Use this calculator to easily compare up to three different mortgages to find out which one works best for you.

Bottom line

United’s Adjustable Rate Mortgage helps us give you a lower introductory rate and gives you the flexibility to move away or trade up to a bigger home before your fixed-rate period comes to end. Our Mortgage Advisors are here to get to know you so we can put you in the best loan for your unique situation.

To get started, schedule a conversation, give us a call at (800) 777-1627, stop by your local branch, or reach out a Mortgage Advisor near you today.