New York Adjustable Rates Mortgages

An adjustable rate mortgage (also known as ARM) is a mortgage that permits the lender to periodically adjust the interest rate; also known as variable rate mortgage (VRM). With adjustable rate mortgages you have a set term with which you pay a set mortgage interest rate, that then adjusts to the market rate after the initial term. An example would be a 7/1 ARM, you would pay a set interest rate for 7 years, and then every 1 year after your mortgage rate would adjust to the current market interest rate. New York adjustable rate mortgages are popular among those who are looking for low initial payments and are expecting increase in pay later or that do not plan on owning their home for a permanent amount of time.

Advantages of an ARM

  • Smaller/lower monthly payments for the term of the loan
  • Beneficial during changing market with low index
  • Flexibility with payment
  • Variable payment allows you to budget every month with extra money for other usage ie. Reinvestment, vacation, and other purchases
  • Increase cash flow
  • Allows you to pay down towards principal
  • 1, 3, 5, 7 where interest changes every anniversary of your loan rate
  • 3/1, 5/1, 7/1, 10/1; fixed interest rate for first few years and then it changes every year afterwards

Disadvantages of an ARM

  • Payment shock occurs during a market with a higher index
  • Smaller payment do not last for the term of the loan causing negative amortization
  • Loan payoff comes with prepaid penalty within the first three years

Lion Mortgage offers New York adjustable rate mortgage options and is dedicated to making sure that you are fully informed and understand an adjustable rate mortgage before you maike the final decision. We know that in many instances and ARM is the right loan option for borrowers with specific financial plans and would be proud to be your New York Mortgage Company. Please contact us today or apply online and we will help you find the right mortgage for your individual financial needs.

 

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