ARM mortgage payments
Mortgage payments vary according to the type of loan you select.
For instance, there are significant differences between payments
for fixed-rate mortgages (FRMs) and adjustable-rate mortgages
(ARMs). This page describes what kind of mortgage payment you
can expect after you have obtained an ARM.
Adjustable-rate mortgage payments can be divided into two types:
those made during the introductory period, and those made after
that. The characteristics of these two types are different, and
should be separately considered.
The mortgage payments made during the introductory period are
similar to those made by fixed-rate mortgage borrowers in that
they are stable. ARM introductory periods feature the added bonus
of having lower interest rates during this stage in the loan.
That means that you can expect low, predictable payments for the
duration of your introductory period (which, of course, varies
from lender to lender). The introductory period is a major incentive
for ARM borrowers.
The mortgage payments made after that are not stable and are
not guaranteed to be low. Instead, the payments will fluctuate
according to what is going on with market interest rates. Since
the future is unknown, the best you can do is guess what your
mortgage payments will be like. Obviously, this is not ideal for
borrowers who want to develop long-term budgets.
If you are lucky, then you might experience a decrease in the
amount of your payment. Alternatively, you might experience a
staggering increase. That is the risk you assume with an adjustable-rate
mortgage, and while they can be a good option for some borrowers,
many people don’t feel comfortable with this uncertainty.