Mortgage Blog

ARMs have gotten a lot of bad publicity lately.  Are they really that bad?  Sometimes they are but many times they aren't bad at all. 

If you take out a 3 year ARM and you plan to keep your home 3 years, why not save $100 per month or more on the payments? If you can get a better rate on a 5 year ARM while plans are to keep the home no more than 5 years, this is a good risk.

Some people only get ARM mortgages.  They refinance every 2 to 3 years and keep getting a below market rate.  While there are costs to refinancing and there are risks of paying a higher rate, it is very often a good risk since you will be saving on the payments in the first years. You may gain $4000 in the first 3 years and lose $1000 in the fourth year.  If you then sell or refinance, you still come out ahead.

It's similar to investing where some people invest in mutual funds instead CD's   You may make a lot more in mutual funds, but you have to be willing to take the risk of losing some money along the way.  A guaranteed rate versus a changing rate. By the way, the ARM rates can go down too.