Does an ARM, or adjustable-rate mortgage, make sense for your refinance? Depending on your circumstances, an ARM may be a beneficial low-cost refinance option. Before refinancing, consider the benefits of adjustable-rate mortgages and fixed-rate mortgages.
If you’re positive you can handle any type of monthly payment increase, an adjustable-rate mortgage might be for you. Borrowers who expect to make a lot more money in coming years may benefit from the low interest rate that an ARM can provide for a short period of time. This includes doctors in residency and lawyers just coming out of law school. Once you start making more money, you may want to consider switching to a steady fixed-rate mortgage, but an ARM might be the best low-cost refinance option for your situation. Use Bankrate’s adjustable-rate mortgage calculator to see what your possible mortgage payments could be.
- Lower rates and payments early in the loan.
- Potential to refinance at a lower rate.
- Ability to invest money saved from low interest rates.
Benefits of a fixed-rate mortgage
If you make a steady monthly paycheck, then fixed-rate mortgages may be more beneficial to you. Fixed-rate mortgages offer the security and safety of a never-changing monthly rate, making it easier to budget. An adjustable rate can be enticing, but a fixed-rate mortgage may be your best option for a low-cost refi. See what your mortgage payment will be with Bankrate’s mortgage calculator.
- Interest rate and payments are consistent.
- Easier to budget.
- Easy to understand for first-time buyers.