ARM Loans: The Benefits

An adjustable rate mortgage loan, commonly called an ARM loan, is a type of mortgage loan with an adjustable, index-based interest rate. Arm loans provide borrowers with benefits that they cannot get through fixed rate mortgage loans.

What ARM Loans can do for you

When interest rates are unstable, ARM loans provide you with an a way to navigate through available loans. By choosing an ARM loan, you avoid the difficulty of tracking down a mortgage with a fixed rate. If interest rates fall, or if you expect interest rates to fall, securing an arm loan in the present means that you will pay the lower interest in the future. In this way, ARM loans allow you to stay at the current best rate in the market.

Due to their variable rates of interest and the increased risk that the borrower takes on, arm loans usually require lower initial payments than fixed rate mortgages do. This means that you can pay less in the beginning stages of your investment. 

ARM loans have a lower initial interest rate. If you are selling your home quickly, are renovating for resale, or are a first time buyer who plans on moving, choosing an ARM loan will allow you to pay the lowest rate without having to worry about increased interest rates in the future.

More Information

For a comprehensive guide to arm loans check out The United States Federal Reserve Board's Consumer Handbook on Adjustable Rate Mortgages.