With low mortgage rates comes a flood of homeowners looking to refinance. And while many homeowners prefer the safe fixed rate loan, getting an ARM may be a better choice for other homeowners.

What’s the benefit with choosing an ARM, and who should do it?

Well, ARMs offer a lower initial interest rate than fixed mortgages. So, if you only plan on living in your home for 5 years or less, a 5/1 ARM is probably a better choice for you. Because you plan on selling before the fixed period on the ARM is over, a lower initial rate may save you more money.

Another possibility with ARMs is that homeowners can pay off the remainder of their mortgage during the initial period because the lower rate allows higher principal payments.

So should you refinance into an ARM? Here’s the checklist:

– Are you close to paying off your mortgage that 5 years would be enough time?

– Do you watch the market, and can handle adjustments and changes in the mortgage rates incase you don’t refinance or move before your first adjustment?

– Are you planning on moving within the next 5 years?

If you said yes to the above, then you should probably check into refinancing into an ARM. However if you prefer fixed mortgages, dislike watching for market changes, and plan on remaining in your home for a long time – a fixed mortgage is probably a better choice.

If you are unsure about future plans, a fixed mortgage is generally the safer bet. After all, if you do move sooner than planned, a fixed mortgage allows you to rent out your property until it gets sold. Fixed rate mortgages also come in both 15-year and 30-year options, so if you planned on moving soon (but not sure how soon), a 15-year fixed just might be the solution.

For more information about ARMs versus Fixed, check out this article from Bankrate.

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