What is an Adjustable-Rate Mortgage?

If you’re buying a condo or loft for sale in Los Angeles, you have plenty of options when it comes to a mortgage. One of those options is an adjustable-rate mortgage, or ARM – but what is it, and why would someone choose that?

What is an Adjustable-Rate Mortgage?

An adjustable-rate mortgage, which is commonly called an ARM for short, is a home loan that has an interest rate that can fluctuate periodically. Your monthly payments may go up or down when the interest rate changes.

Most ARMs have an initial fixed-rate period during which the interest rate stays the same. After that, the interest rate changes based on what’s happening with new mortgage interest rates. Usually, the rate changes annually.

Pros of Adjustable-Rate Mortgages

Some people find that adjustable-rate mortgages are the best choice because the initial interest rate is usually lower than it is on most fixed-rate mortgages. In some cases, after the fixed-rate interest period ends, the interest rate can go down – and that results in a lower monthly payment.

Cons of Adjustable-Rate Mortgages

Sometimes people decide against using an ARM because after the fixed-rate period ends, the interest rate could rise – and that means monthly mortgage payments go up, too. Nobody can predict interest rates, so you won’t be able to predict how much you’ll have to pay each month.

Are You Buying a Condo or Loft for Sale in DTLA?

If you’re thinking about buying a condo in Los Angeles or a nearby community, call us at 213-254-7626 or contact us online.

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