Adjustable-Rate Mortgages San Antonio, TX

What Is An Adjustable-Rate Mortgage?

An adjustable-rate mortgage (ARM) in San Antonio is a type of home loan with fluctuating interest rates.

Unlike its fixed-rate counterpart, the interest rate on an ARM shifts with the market, meaning your monthly payments may change from time to time.

An ARM offers distinct advantages and disadvantages, such as potentially lower rates but more expensive monthly payments.

How Does An Adjustable-Rate Mortgage Work?

An adjustable-rate mortgage (ARM) in San Antonio is a type of mortgage loan in which the interest rate adjusts based on an underlying index. ARMs commonly adjust every one, three, five, or seven years.

During this adjustment period, the interest rate and payment amount may change. The initial interest rate on an ARM is typically lower than that of a fixed-rate mortgage, which appeals to many homebuyers.

However, the danger of increased interest rates is a concern with an ARM. This is because if interest rates climb, so will your monthly payment. To mitigate this risk, lenders frequently limit how much the interest rate can rise during each adjustment period and over the life of the loan.

Additionally, lenders may give borrowers the option of converting an ARM to a fixed-rate loan after a set number of years.

Types of ARMs in San Antonio, TX

• Hybrid ARMs – Hybrid ARMs have a fixed-interest rate for a period of time before transitioning to an adjustable rate.
• Interest-Only ARMs – Interest-only ARMs allow you to pay only the interest due on your loan for a portion of the loan term.
• Payment Option ARMs – Payment option ARMs provide options for how much and when you can make payments.
• Negative Amortization ARMs – Negative amortization ARMs let you make a lower payment than the actual cost of interest and principal, allowing the unpaid balance to grow.
• Combo ARMs – Combo ARMs involve two separate periods, one with a fixed interest rate, the other with an adjustable rate.
• Jumbo ARMs – Jumbo ARMs are designed for larger loans that exceed conforming limits set by Fannie Mae or Freddie Mac.
• Convertible ARMs – Convertible ARMs start off with a fixed interest rate which can later be converted to an adjustable rate loan.

We know it can be overwhelming trying to find the right type of mortgage for you. We at Friendly Mortgage want to help you make an informed decision so you can choose a loan based on what works best for your financial goals!

Pros and Cons of an Adjustable Rate Mortgage

Adjustable-rate mortgages (ARMs) in San Antonio may provide an alluring savings opportunity, but it’s essential for buyers to be aware of the potential pitfalls before hopping in.

These loans can offer lower initial interest rates, but it’s important to note that these rates can increase over time, making monthly payments rise if they don’t have a cap.

Negative amortization features also exist in some ARMs, and borrowers should consider what this means as far as their payments go.

Furthermore, finding an ARM loan has become more challenging recently since lenders have tightened up their lending criteria.

While there is some risk involved with adjustable-rate mortgages in San Antonio, with prudent consideration, one could make the most of them.

ARM Mortgage FAQs

Can you pay off an ARM early?

If you refinance or pay off an ARM before the predetermined period—usually within three to five years – you may be subject to special fees and penalties with certain types of ARMs, such as the interest-only and payment-option varieties. Be sure to exercise caution when considering such a move.

For which type of buyers would an ARM be a good option?

Searching for an easier and more affordable route to homeownership? An ARM could be the perfect solution! With lower monthly payments and a smoother borrowing experience, this type of loan is sure to give you the flexibility you need.

Can you refinance out of an ARM?

Considering refinancing from an Adjustable Rate Mortgage (ARM) in San Antonio? It’s absolutely possible, yet requires some homework and thought to ensure it’s the best move for your own needs. Be sure to carefully examine all options before making a final decision by giving us a call.