Physical Address
304 North Cardinal St.
Dorchester Center, MA 02124
Physical Address
304 North Cardinal St.
Dorchester Center, MA 02124
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Adjustable-rate mortgages (ARMs) are gaining popularity among homebuyers seeking more affordable options in today’s market. At O1ne Mortgage, we want to help you understand the ins and outs of ARMs so you can make an informed decision. For any mortgage-related needs, feel free to call us at 213-732-3074.
An adjustable-rate mortgage is a home loan with an interest rate that changes over time. Initially, ARMs offer a fixed-rate period, typically ranging from six months to ten years. After this period, the interest rate adjusts periodically based on a benchmark index, such as the one-year Treasury bill or the Secured Overnight Financing Rate (SOFR).
ARMs come with several advantages:
However, ARMs also have some downsides:
When choosing between an ARM and a fixed-rate mortgage, it’s essential to compare the costs. For example, if you’re buying a $500,000 home with a 20% down payment, a 30-year fixed-rate loan at 7.18% interest would have a higher monthly payment compared to a 5/1 ARM at 6.20% for the first five years. However, if the ARM’s rate increases significantly, the fixed-rate mortgage could become the cheaper option in the long run.
An ARM might be a good choice if you plan to sell your home before the fixed-rate period ends or if you expect interest rates to remain stable or decrease. However, if you prefer predictability, a fixed-rate mortgage might be better for you.
If you choose an ARM, you can refinance to a fixed-rate loan after the initial rate period. Keep in mind that refinancing comes with closing costs, which can range from 2% to 6% of the loan amount. If you plan to stay in your home long-term, refinancing to a fixed-rate mortgage can provide stability and protect you from future rate increases.
Having good or excellent credit can help you secure a lower mortgage rate, whether you choose an ARM or a fixed-rate mortgage. Check your credit report and score regularly and consider using tools like Experian Boost® to improve your credit score.
For personalized mortgage advice and to explore your options, contact O1ne Mortgage at 213-732-3074. We’re here to help you find the best mortgage solution for your needs.
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