Adjustable Rate Mortgages: What You Need To Know

What is an adjustable-rate mortgage? – An adjustable-rate mortgage is a loan that features a certain rate for a fixed amount of time, and the interest rate will adjust to the current rate every 12 months after the initial fixed-rate period. Guardian Credit Union offers one, three, and five-year adjustable-rate mortgage loans, meaning your rate will be set in stone for that amount of time before adjusting every 12 months following the initial period.

What are the benefits of an adjustable-rate mortgage? – Adjustable-rate mortgages tend to have lower initial rates than fixed mortgages, so they benefit buyers who are planning to live in their home for a shorter period, as the rates are locked in at these lower rates for the length of the predetermined time. Depending on rates, buyers can continue saving money after the initial period if rates are lower than they would be had they locked in with a fixed-rate mortgage.

Why are people hesitant to get adjustable-rate mortgages? – After the 2007 housing crash, a lot of homebuyers became wary of adjustable-rate mortgages. With rates increasing in 2022, many people are beginning to opt for them again. Adjustable-rate mortgages are a safe option for people who don’t plan on living in their home long-term, as they can save money on the initial low rates specified in the term of their choosing.

Why should I consider getting an adjustable-rate mortgage? – If you’re considering purchasing a house but don’t plan on making it your forever home, an adjustable-rate mortgage can be a smart option to help you save money over your tenure in the home. However, if you believe you’ve found the house you want to spend the rest of your life in, an adjustable-rate mortgage can also be the right choice for you. By locking in lower rates for the length of your ARM, you can take advantage of the lower rates, and choose to refinance out of the ARM if rates become less advantageous over time.

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