During times of inflation, every dollar counts, especially when it comes to mortgages. Homebuyers and owners are encouraged to consider adjustable-rate mortgages (ARMs) to save money. A well-qualified borrower can secure an ARM at under 6%, locked in for the first seven years, saving them significant amounts compared to fixed-rate mortgages. For example, on a maximum Fannie Mae conforming loan of $806,500, the savings could amount to $16,968 over the first seven years.
While ARMs have the potential to increase after the initial seven-year period, the interest rate changes are limited by caps and based on factors like the SOFR index. For larger loans, jumbo ARMs are also available with potential savings. Additionally, interest-only ARMs can provide affordability, especially for short-term ownership.
It is advised to consider ARMs based on individual parameters and potential savings. While fixed rates remain a reliable option, ARMs may be beneficial for those who anticipate decreasing interest rates in the future for potential refinancing savings. Overall, understanding the options and their implications is crucial for making informed mortgage decisions.
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