Adjustable-Rate Mortgages (ARMs)

SOURCE www.cnn.com
Many homeowners who took out adjustable-rate mortgages (ARMs) in 2016 are facing significantly higher monthly payments this year as interest rates have increased. ARMs can offer temporary relief but come with the risk of rates adjusting periodically based on market conditions.

Key Points

  • 1. Many homeowners who took out ARMs in 2016 are facing higher monthly payments due to interest rate increases.
  • 2. ARMs have gained traction despite their drawbacks, with 1.7 million homeowners using them since 2019.
  • 3. It's important to closely monitor ARM details to avoid financial difficulties.
  • 4. Interest rate caps are in place to prevent costs from escalating out of control.

Pros

  • Can offer temporary relief for homebuyers with low introductory rates
  • May be beneficial for those comfortable with the risk of interest rate increases

Cons

  • Monthly payments can significantly increase when rates adjust
  • Can lead to financial stress if not managed properly