Adjustable Rate Mortgages

Adjustable Rate Mortgages are back! With the rise of mortgage interest rates over the past nine months, ARMs have made a resurgence. An ARM is a loan that has an interest rate that is not fixed for the long term. It usually is fixed for 1, 3, or 5 years, then adjusts each year based on the current rates at the time. In a climate of high interest rates, ARMs become popular. Their rates are lower than a 30-year fixed at the beginning. But over time, the rates will increase or decrease with the market, bringing uncertainty to future monthly payments. The typical borrower who gets an ARM either expects rates to come down in the future or doesn’t expect to have the loan for a long time. ARMs were super popular before the 2008 meltdown, but they’re different today. How? Well, now you actually have to qualify to get one. But not everyone likes these loans. For example, financial guru Dave Ramsey advises against them.

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