ARM mortgage payments

Mortgage payments vary according to the type of loan you select. For instance, there are significant differences between payments for fixed-rate mortgages (FRMs) and adjustable-rate mortgages (ARMs). This page describes what kind of mortgage payment you can expect after you have obtained an ARM.

Adjustable-rate mortgage payments can be divided into two types: those made during the introductory period, and those made after that. The characteristics of these two types are different, and should be separately considered.

The mortgage payments made during the introductory period are similar to those made by fixed-rate mortgage borrowers in that they are stable. ARM introductory periods feature the added bonus of having lower interest rates during this stage in the loan. That means that you can expect low, predictable payments for the duration of your introductory period (which, of course, varies from lender to lender). The introductory period is a major incentive for ARM borrowers.

The mortgage payments made after that are not stable and are not guaranteed to be low. Instead, the payments will fluctuate according to what is going on with market interest rates. Since the future is unknown, the best you can do is guess what your mortgage payments will be like. Obviously, this is not ideal for borrowers who want to develop long-term budgets.

If you are lucky, then you might experience a decrease in the amount of your payment. Alternatively, you might experience a staggering increase. That is the risk you assume with an adjustable-rate mortgage, and while they can be a good option for some borrowers, many people don’t feel comfortable with this uncertainty.