*disclaimer: Not all individuals will qualify for each loan type and/or scenario. Please contact me to see if you'd qualify for these loan products and/or discuss your options.
Have you ever been to a gym and looked around at everyone with massive arms and thought to yourself..."Man, I wish I looked like that"! Well guess what, you can.
It's going to take a plan, lots of discipline, consistency, and maxing out every now and again to see your progress.
Maxing out a the gym consists of doing a few easy reps to engage your muscles and stretch them out a bit, then upping the weight you're using with each successive lift. Once you get to a point of exhaustion, you stop lifting.
How in the heck does this apply to mortgages? We're getting there, I promise.
Obtaining an Adjustable Rate Mortgage (ARM) can be a great option to look into. If you make a plan, be disciplined, and stay consistent with your payments, you'll see how having an ARM can benefit you. The process is similar to maxing out your reps at the gym. It starts with a few reps at a lower weight to engage your muscles, and then the weight increases as your lift continues.
When discussing ARM's, your loan officer may throw out numbers like, "3/1 ARM" or "7/6 ARM". All that these numbers tell you is what the "initial rate period" is, and what the "adjustable rate period" is.
In the example above, the initial rate period would be three years, or seven years from the time that you close on your loan. The interest rate that you close with would remain fixed for that period of time before it would start to change. This is the time in your workout when you lift lighter, easier weights to get your muscles ready.
Once you get to a certain point in your workout, the weight increases.
Adjustable Rate Mortgage loans will usually have smaller interest rates to begin, but they may increase once the adjustable rate period begins. Sometimes, your interest rate may jump a full percentage point once you hit the end of your initial rate period. The interest rate may then continue to climb by that much at each six month mark or year mark of your mortgage.
Most of the time, a loan will change once every six months, or once every year. If the second number in this example is one, then it changes every year. If the second number is six, the interest rate will fluctuate every six months.
So, in simple terms regarding the examples given above, the first ARM would have an initial fixed rate for three years, and then change every year afterwards (3/1 ARM). The second ARM would remain fixed for seven years, before changing every six months (7/6 ARM).
There will come a point where your interest rate will stop increasing. This is called the "interest rate cap." You will discuss this number with your loan officer when you chat about whether or not an Adjustable Rate Mortgage is good for your situation.
I consider this the maxing out point of the workout. This is the time when you might be lifting more than you have before, and the stress on your muscles reaches a maximum point before giving out.
This is where it's important to have a plan in place, and be disciplined with that plan.
It's usually not the smartest thing in the world to have an ARM as your financing plan for the long run. If I were to give the reader advice, it would be to refinance once you get to the end of your "initial rate period". If you're not disciplined and keeping an eye on your amortization charts that you receive at closing, you will find money flying out of your pockets before they enter them.
Having an ARM loan can be a great thing if you use it wisely. If you don't use it wisely, you'll find your muscles injured and doctors bills piling up.
Please contact me and lets discuss the benefits of ARM's and make a plan on how to get the best financing options available to you.
*disclaimer: Not all individuals will qualify for each loan type and/or scenario. Please contact me to see if you'd qualify for these loan products and/or discuss your options.
Brayden Ramsay NMLS #1997195
Momentum Loans NMLS #1606597
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