If you’re hoping to own a home one day, financing is one of the main decisions you’ll need to make.  

There’s no one size fits all solution for financing your new home and finding the right mortgage can be difficult and intimidating. One of the biggest questions concerning mortgage options is whether to choose a fixed rate mortgage or adjustable-rate mortgage (also known as ARM). 

Ryan Campbell, Mortgage Originator at Triangle Credit Union, mentions that many people start out with a negative view of ARMs. Many people immediately decide they want a fixed rate because it seems safer, but they may be overlooking the benefits of an ARM. 

“For many people, an ARM is a scary option. They may have heard from friends or family to avoid adjustable-rate mortgages at all costs, but this advice can often be misconstrued because adjustables might give you the best option for your financing, with the smaller financial burden.” Ryan followed it up with, “Don’t do a loan because someone else told you, do it because it works for you.”  

Here are some of the surprising benefits of ARMs that you may have not considered and might make you warm up to the idea of using one to finance your house.  

Potential for Great Rate with a Lower Introductory Payment 

Traditionally, ARMs offer great terms and rates which tend to be lower than fixed rate options. There’s also a chance you can get a longer-term mortgage with an adjustable rate. A lower rate with a longer term means that your monthly payment will be lower and more manageable.  

For example, Triangle Credit Union offers a 40-year term adjustable-rate mortgage option. This is a great offer because it means you can pay off your loan over 40 years instead of 30 years, ultimately lowering your monthly payment.  

Caps to How High the Rate Can Adjust  

If the word adjustable scares you because you know the rate can go up over time, you don’t have to fear too much.  

Adjustable-rate mortgages have caps set on how high the rate can adjust.  

Ryan explains that certain caps are put in place to ensure the rate only goes up a certain amount and that it can’t go any higher or lower over the life of the loan. Don’t worry about the rates adjusting up; this doesn’t mean your rate will adjust out of control.  

Figure out whether you’ll be able to continue to afford your payments if your rate adjusts to the max cap, that way you’ll be prepared when they do.  

Potential to Adjust Down 

Believe it or not, there have been times in history when rates have adjusted lower.  

If rates are better by the time yours is set to adjust, they restructure at a lower rate. Although this isn’t too common, it’s certainly something you may not have considered when you hear about adjustable-rate mortgages.  

Pay attention to the economic climate and who knows, you may get fortunate with a rate that adjusts down without having to refinance to get a lower rate. 

No Prepayment Penalties 

Moving is a normal occurrence in many of our lives. You may get a new job, retire, or just decide to move from the area or just down the block in your neighborhood.  

In the past, paying your mortgage off early meant you would need to pay pre-payment penalties. Now, if you decide to move or refinance for whatever reason, you won’t be charged any fees for prepaying the loan.  

This is a huge benefit if you don’t plan on being in the home for a long time. If you buy a home with an adjustable-rate mortgage but then decide in a few years, maybe even before the rate adjusts, that you want to move, you won’t get slammed with fees for doing so.  

But, how do you know that an adjustable rate is right for you?  

Ryan recommends you ask yourself some of these specific questions when you’re considering the different types of loan options.  

• How long do you think you’ll be living in that home? 
• What’s most important to you right now: low payment or best rate?  
• Based on your budget, what can you afford? (Note: A lower rate and longer-term help with buying power.)  
• How much do you have saved for the downpayment and closing costs? 

Ryan also stresses the importance of educating yourself. He recommends you do research to learn how mortgages work. You’ll learn about terms, adjustment periods, how the loans are structured and more.  

Learn all you can about the different types of options available, how they work and what you should consider before signing that line.  

That’s what Triangle’s Mortgage Loan Originators are there for. They take the time to meet with you and discuss your options to help you get the best mortgage you can. 

Visit any of Triangle’s local branches or schedule an appointment online to get in touch.