Delaware Mortgage Loans

Adjustable rate Mortgages (ARMs) are loans with interest rates that change.  ARMs usually start with lower monthly payments than fixed rate mortgages.  With a fixed rate mortgage, the interest rate stays the same during the life of the loan.  With an ARM, the interest rate changes periodically, usually in relation to an index, and payments may go up or down accordingly.

Lenders generally charge lower interests rates on ARMs than on fixed rate mortgages.  This could potentially save you a lot of money.  When considering whether an ARM makes sense or not, you must first consider how long you will keep the loan you are getting.  If you will probably refinance or sell the home in the next 3-5 years than might want to consider a 5 year ARM.  This would have the interest payment fixed for the first 5 years of the loan and then it could adjust either up or down.  The 5 year ARM is typically a lower interest rate than a 30 year fixed so you could potentially save a lot of money.

You must consider what your rate could change to after the 5 year fixed period.  This is where not all ARMs are created equal.  Your lender should explain to you how the ARM will change, how often, what the most it could change at one time and what the lifetime cap on the interest would be.  With this information you can understand what would happen if you still had the loan after the 5 year fixed period.

If you would like more information on ARMs or would like free analysis on an ARM versus a Fixed rate for the purchase of a new home or the refinance of your existing mortgage, please feel free to call me John Thomas at 302-368-7132 or send me an e-mail to DelawareMortgages@yahoo.com.