2007-02-18 09:05:04 · 6 answers · asked by Anonymous in Business & Finance ➔ Renting & Real Estate
The benifit f the ARM loan is that you usually can get an initially low interest that's guaranteed for the period of the ARM allowing you to purchase a home at a higher price than you would normally be able to afford. Once the ARM's initial period ends the rate fluctuates with the market and cause your payments to become so high you can no longer afford them. An arm is best used if you only plan on staying in the house for a few years during that initial period or if you know you will be able to refinance at a likly higher rate that is fixed, after that that period. for example (using a 3 year arm) if you fix homes and resell them you may want to purchase a fixer-upper on an ARM, live in it for 3 years while you fix it and then sell it when the 3 years are up. Another example (again a 3 year arm) would be a married couple of which one is working and the other is about halfway through college. The college student has maybe 2 years left before graduating at which point they will both work and family income will therefore double. The couple buy a home on a 3 year ARM that they could not afford on a 30 year fixed. Two years later the college student has graduated, is working, but still has some student loans to pay off. The couple spends the next year of their ARM paying off as much of the student loans as the can and then at 3 years refinances at a slightly higher rate with a 30 year fixed. The student loans are paid off and they both work s now they can afford the 30 year fixed. Just some of many examples but if you do not have anything that's fairly definiate in changing income at the end of the arm period or if you plan to live in the house for many years a fixed year is the best way to go.
2007-02-18 09:37:14 · answer #1 · answered by cassandra581 6 · 1⤊ 0⤋
With today's low fixed mortgage rates about the only reason would be that you definitely plan to sell within 3-5 years, before you can get stuck with rising interest rates on the ARM loan. During those 3-5 years you might still have the advantage of the lower ARM rate.
2007-02-18 09:26:25 · answer #2 · answered by Latigo 3 · 0⤊ 0⤋
If you plan on being there short term or if you want the extra money to pay off another loan during the arm period. Then when it comes time for the rate to adjust, you refinance again and decide if you want another arm or fixed.
2007-02-18 09:55:42 · answer #3 · answered by Brian K 2 · 1⤊ 0⤋
To get a lower payment.
2007-02-18 15:11:24 · answer #4 · answered by bmwdlr 2 · 0⤊ 0⤋
Im a loan officer who can help you on the best rates. please visit my site, www.dotheloan.com
2007-02-18 14:30:39 · answer #5 · answered by celia s 1 · 0⤊ 0⤋
They are just a way to let people who shouldn't afford a house to buy one...For awhile.
2007-02-18 09:24:41 · answer #6 · answered by bob shark 7 · 0⤊ 2⤋