When you are purchasing a mortgage loan, choices available before you are plenty. You can opt for a federally sponsored loan or a private mortgage loan. Again, you have to make a broad choice between a fixed rate mortgage (FRM) and an adjustable rate mortgage (ARM). Here we discuss about the underlying reasons behind the selection of an ARM.
Gives you chance to save money
One prime reason to get away from a rental home and to purchase a new home is to save money on a regular basis. You must try to lower down your monthly payment and to save something on a regular basis. ARM allows you the chance to qualify for the lowest interest rate possible.
Makes it easy to repay the loan
If the mortgage loan that you have taken out is an adjustable rate mortgage (ARM) and if the mortgage rate is comparatively low, then your mortgage payment burden is relatively less. In that case, it becomes easier to repay the principal balance.
Do away with the private mortgage insurance
You might have taken out an ARM and you might not have paid the 20% down payment amount. In that case, you are required to pay the private mortgage insurance. If the rate on the ARM is low, then you will be able to save something on a regular basis. You can accumulate your savings and use that money to make at least 20% down payment. This will help you do away with the private mortgage insurance.
These are some of the reasons why opting for an adjustable rate mortgage makes sense.