Mortgage Loans – Part 4 The 10/1 Year ARM

Mortgage Loans – Part 4

The 10/1 Year ARM

Yes, another Adjustable Rate Mortgage. But this time, the terms are different. For the first 10 years, the interest rate stays the same. After that, the interest rate changes yearly. Why would you want something that changes on the back end of the loan when you don’t know what the market will be like? Well, that’s because the mortgage company doesn’t know what the market will be like either, and they are banking on interest rates getting higher. Because of that, they are often willing to cut you a break in the interest rate for the first 10 years, which means a lower payment.

If you are going to be in a house for less than 10 years, this loan could be a good option. It provides the stability of a fixed rate mortgage with often the benefit of a lower interest rate. And like a typical one year ARM, you can always choose to refinance. This mortgage could be a bad idea for people who are going to be in their home for longer than 10 years because of the shock of going from a stable monthly payment to a variable rate, which could very well make your mortgage payment a lot larger.

As with all adjustable rate mortgages, make sure that you have a certified loan officer explain all of the details of the loan to you so that you understand what your responsibility will be in the future and when your mortgage payment amount could change.