What You Need to Know About Adjustable Rate Loans ARM’s in Colorado

Chances are you’ve heard the term Adjustable Rate Mortgage, also known as “ARM”, mentioned in conversations about home mortgage loan programs. In recent times, ARM’s have not been too popular as interest rates have skyrocketed causing some home owners to default on home mortgage loans, unable to afford the increased payments associated with their adjustable rate mortgages. In contrast, the adjustable rate mortgages have helped many consumers get into homes that were previously out of their range. Learn more about what the adjustable rate mortgage is and how it can help you with buying a home.

What is an adjustable rate mortgage?

An adjustable rate mortgage, or ARM as it’s more commonly called, is a type of home loan that features an interest rate that is not fixed. This means the interest rate paid from month to month fluctuates according to the average home loan interest rate for the region in which your home exists. The amount of the monthly mortgage payment made is based on a predetermined amount plus interest. So when the interest rates are low, the monthly interest payment is also low, making this form of Denver home loan very affordable for most consumers. When the interest rate is high, so too are the monthly mortgage payments.

Is an adjustable rate mortgage right for me?

Depending on your individual circumstances, an adjustable rate mortgage or ARM may be a good solution for you to purchase or refinance a home in Denver. Some of the factors that can affect your ability to purchase a home under an adjustable rate mortgage program are credit history, available income and how much down payment you have to work with when financing a home purchase.

The advantages of an adjustable rate mortgage are that the payments are probably going to be lower initially, you will be able to purchase a home in a higher cost bracket and you may have a much lower down-payment requirement than with fixed rate mortgages. In addition, if you are buying a home for the purposes of only living in it for a short period of time, this will enable you to enjoy lower monthly payments during that stay, while interest rates are at their lowest.

The disadvantages of an adjustable rate mortgage is that they are considered riskier in that you cannot predict what the housing market will do and therefore you may have to expect higher payments at some point in the future. In addition, if the interest rates do go up for extended periods of time, you may end up paying more for your house over the 10,15 or 30 years that you have the ARM in place.

How Naranche can help you with adjustable rate mortgages.

Keep in mind that you are not alone in this search for an affordable Denver home mortgage loan program in Colorado. The home loan specialists at Naranche have been serving the Castle Rock, Cherry Hills, Denver, Golden, and Littleton areas since 1981, so they’ve seen the housing market in good times and in poor times. Let the hard working mortgage brokers at Naranche provide the information and resources you need to make the wisest decision in buying or financing a home.