Benefits of adjustable-rate mortgages
The main feature of an adjustable-rate mortgage (ARM) is the interest rate adjusts during the loan term. Most ARMs start with a promotional rate, which may change multiple times a year or at specific adjustment periods.
When the promotional rate expires, the rate increases up to a ceiling or cap. Because the interest rate fluctuates up or down, your monthly payment can increase or decrease based on the performance of the particular rate index that the loan follows.
Depending on your mortgage goals, an ARM can offer several advantages, especially these days as the fixed rate has recently increased.
- Lower initial interest rate. This lower initial rate makes ARMs very attractive. This provides some time to do renovations or potentially earn higher income, so when the rate adjusts higher you’ll be in a stronger financial position.
- Lower monthly payments. A low introductory rate means lower payments each month. Even when the rate adjusts higher you may end up with a lower rate than you may have had with a fixed-rate loan.
- Better for short-term homeowners. Starting with a low rate is beneficial if you don’t plan to keep the house for many years, as you’ll be able to take advantage of lower monthly payments before the fixed-rate period ends.
- Increased cash flow. Paying less in interest at the start of the loan frees up cash that you can use for other investments and expenses.
- Flexible refinance options. At the time an ARM’s interest rate adjusts higher, you can choose to refinance to a fixed-rate mortgage, or keep the adjusted rate.
Credit Union of Southern California (CU SoCal) offers a 5/5 ARM with a low initial rate
CU SoCal also offers interest-only ARMs that can be a perfect option for short-term homebuyers and investors who may not own the home for a long time and want the lowest possible payment.
Applying for a CU SoCal mortgage is easy! You can apply Online, call the CU SoCal Home Loans team at Center at 800.698.7196, or email us at [email protected].
