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Kissinger Bigatel & Brower Realtors

State College, Pennsylvania
Real Estate Team
814-571-8204
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Adjustable Rate Mortgages - The PROS & CONS

Now that you know what an ARM is and how it works, you may be wondering what the advantages and disadvantages are. So let’s explore that issue.

Offering adjustable rates allows lenders to transfer part of the interest rate risk from themselves to the borrower. If you get a fixed rate mortgage and the interest rate then goes up, it costs the lender money. However, if you have an adjustable rate mortgage, as the interest rate goes up, so does your payment, thus compensating the lender. Adjustable rate mortgages are particularly useful when unpredictable interest rates make fixed rate loans hard to get.

One of the main advantages of an adjustable rate mortgage is that the initial interest rate is lower than that of a fixed rate mortgage. A lower rate means lower payments, which may help you qualify for a larger loan. This is an important detail if you expect your future earnings to rise. In this case, the ARM will allow you to qualify for a larger loan amount earlier rather than later.

However, this information should only be used with care. If you use an ARM to qualify for a larger loan amount than a fixed rate would allow you and the interest rate then rises drastically or your income doesn’t rise, you may not be able to afford the larger monthly payments, thus causing you to default on your loan.

A situation in which an adjustable rate mortgage makes sense would be if you are only going to keep the house for a short period of time. If you are only planning to own your house for only a few years, the risk of the interest rate rising goes down. This means that you will get a better rate with an ARM, making it a good choice. However, if you plan on staying in your home for a long period of time, a fixed rate may be a better option.

The lesson here is to have a plan. Know what your goals are in purchasing a home and plan for all eventualities. Do your research when shopping for an ARM and consider the worst-case scenario.

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Kissinger Bigatel & Brower REALTORS® 
1612 N Atherton St
State College, PA 16803
Phone: 814-571-8204
Email: pchiarkas@comcast.net
Brokerage Phone: 814-238-8080

Testimonials

After having been "assigned" a real estate person for our first showing, we decided going forward to go with Krissy Bonson. We have had a personal relationship with her in the past and we will never regret going with her. Krissy is the definition of professionalism and will be prompt and honest and  will go the extra mile for you all the time. She tried her best to work with our schedule and when we did finally have an offer accepted, she answered all of our questions and walked with us every step of the closing process. I cannot imagine anyone who could have done a better job for us than Krissy. I would highly recommend her to anybody considering someone to work with either buying or selling a property ANK9
Peter and his team helped us buy the perfect home for our family. They listened carefully to what we were looking for in a home and guided us towards those homes and locations that were suitable. When we had questions they responded very promptly and thoroughly. We're very satisfied with our  experience! kgphillips4
Krissy was great to work with throughout the entire home buying experience. She listened and provided great feedback on houses that we visited. When we got to the buying process she was very positive and knowledgeable with everything. She never left us with a feeling of doubt and was always open  and honest with us. I would highly recommend her to anyone buying a new home in the area ChazRobison
Peter and Krissy were amazing to work with. We had a few "hiccups" in the sale of our house (not due to them) but they continued to do what they said they would and they got our house sold. dakingemt
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