In fact, theyre more popular than theyve been in 15 years.
ARMs have since become more heavily regulated and are less likely to break the economy into a million pieces.
But is an adjustable rate mortgage the right move for you?
What Are the Pros and Cons of an Adjustable Rate Mortgage?
Not so with an adjustable rate mortgage.
Lets look a little closer at the pros and cons of an adjustable rate mortgage.
No Interest Til Almost 2027?
Thats what happened to a lot of people in the last big housing crash.
Picture an adjustable rate mortgage where the interest rate is set for the first five years.
On a $400,000 loan, thats about $360 in monthly savings.
How tempting is that immediate savings?
Its the first time its above 12% since 2007.
For most of last year, it was only around 2.5%.
Back then, many lenders werent bothering to check whether homebuyers had enough income to afford a mortgage.
When their monthly payments ballooned quickly, those homeowners defaulted on their loans.
Since then, stricter regulations have tightened up lending practices.
Most ARMs have their interest rates fixed for five, seven or 10 years.
Are they planning to stay in the house for longer than the fixed-rate period of the loan?
These Experts Say, Dont Do It
Not everyone thinks ARMs are a good idea.
We found some experts who said theyd warn you away from them.
Thus, getting an ARM doesnt make sense at all, Zhou said.
I would never recommend an ARM, Drury said.
How long will the rate be fixed?
The shorter the time, the cheaper the loan is.
But if you decide to stay in your house, be prepared to pay more in the long run.
Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder.
