Service 1st Mortgage is a full-service mortgage broker that caters to the needs of homeowners interested in obtaining or refinancing their mortgages. Based near Washington D.C., Service 1st Mortgage specializes in low-interest federal loans and connects clients to the best mortgage types and rates for their circumstances.
Adjustable-rate mortgages, also known as ARMs, are a type of variable home loan. ARMs begin with a lower than market average rate. Borrowers may sign on to this introductory rate for a set period between 30 days to several years.
When this period is up, the ARM rate will readjust to the market. However, some ARM agreements put caps on how much the interest rate can increase or the overall monthly payment. Since interest is compounded on an ARM, a monthly payment set too low can cause the loan holder to be underwater. This means the amount owed is more than what the home was sold for. This can be a disadvantage of an ARM. However, there are also benefits to choosing a variable rate mortgage.
For example, buyers who plan to resell their home before the introductory period is over can benefit from the lower mortgage payments. ARMs are also ideal for people who can pay off the mortgage before higher interest rates kick in or who anticipate a large increase in income over the next few years.
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