Mortgage interest rates constantly change because they depend on fluctuations within the market. Adjustable rate mortgages change with interest rates. This kind of mortgage is an excellent option for families that will only be spending a few years in their home, so that a rise in the interest rates will not matter as much.
How an Adjustable Rate Mortgage Works
Most adjustable rate mortgages are considered “hybrid” or “fixed period”. This means that the homeowner will pay the mortgage at a fixed-rate for a period of time, ranging from 5 to 10 years. After this point, payments will change according to mortgage interest rates in the current market. The price of adjustable rate mortgage payments will usually change once a year after the fixed rate period has ended.
Adjustable rate mortgages are a good option if you believe that your income will rise with the interest rates, or you believe that the interest rates will drop over the years. However, there is more risk involved in adjustable rate mortgages. If your loan’s interest rates do rise, it may become more difficult to pay off your mortgage. Take a look at our mortgage calculator to see what your monthly payments with an adjustable rate mortgage would look like. Reverse Mortgages of Southern California is ready to discuss any concerns that you may have about your mortgage and the best options for your family.