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Why Choose A 5/1 Adjustable Rate Mortgage?

By Stacy Williams

In recent years, many mortgage defaults have been blamed on subprime mortgage lending, and the availability of 5/1 adjustable rate mortgages. While 5/1 adjustable rate mortgages may be a bad idea in many cases, there are many situations when one of these products could be a great option.

You Want the Cheapest Rate Possible

The first situation when you should choose a 5/1 adjustable rate mortgage is when you want the cheapest rate possible. Since these mortgages do not come with the security of a locked interest rate, they are often up to 1% cheaper than a fixed rate mortgage. This could save you thousands of dollars over the course of the five year fixed rate period. This will also give you more home affordability when shopping for a house.

You Won’t Keep the Mortgage Long

The next situation when you should choose a 5/1 adjustable rate mortgage is when you don’t plan on keeping the mortgage for a long period of time. If you are certain that you will either sell your home, or refinance your mortgage before the mortgage adjusts, then this could be the ideal product for you.

You Think Rates Will Stay Low

The third situation when you should choose a 5/1 adjustable rate mortgage is when you think that rates will stay low for a long period of time. Right now, mortgage rates are as low as they have ever been. Because of this, it is very likely that they will increase to a much higher point in the future. However, if you think they will stay low, then a ARM product will be ideal.

Related posts:

1. Why Should I Choose An Adjustable Rate Mortgage?
2. What Type Of Mortgage Loan Should I Choose?
3. Fixed-Rate or Adjustable-Rate Mortgage: Which Is Better?
4. When is the Adjustable Rate Mortgage a Good Idea for Home Buyers?
5. How Do Mortgage Rates Influence The Type Of Loan I Choose?