An adjustable-rate mortgage (ARM) can benefit your clients in a couple of ways. The pros of obtaining an ARM may outweigh the perceived need to apply for a fixed-rate loan for their next home purchase.
As market conditions and interest rates fluctuate, fixed-rate loans can become less desirable for some buyers, as rates rise to levels that make qualifying for a home purchase difficult or impossible. An ARM with a low introductory interest rate and accompanying low monthly payments may enable someone to qualify for a larger loan than a fixed-rate loan would allow. ARM indexes and resulting monthly payments can go up or down over the life of the loan. In the shorter term, a buyer can allow for payment increases as their income goes up.
Those home buyers and investors who plan on short-term ownership can benefit from an ARM, where the lower introductory interest rate is fixed for three, five, seven or 10 years before rolling into the ultimate adjustable period of the loan. Selling before the fixed period is up can save thousands in interest.
Personal financial and income circumstances will ultimately determine if an ARM will benefit a buyer’s real estate portfolio. Since these loans are typically lender portfolio loans not being sold on the secondary market, buyers can also benefit from less restrictive eligibility requirements. ARMs provide more buyer options for homeownership while lenders provide more diverse lending to local communities.
ARMs are a great sales tool. Contact me and I will help you give your buyers the best information.