Is an Adjustable-Rate Mortgage Right for You?
Kiplinger's Personal Finance|February 2023
With fixed rates rising, ARMs offer lower monthly payments for the initial term. But know the risks.
LAURA PETRECCA
Is an Adjustable-Rate Mortgage Right for You?

WHEN MORTGAGE RATES were at record lows not so long ago, adjustable-rate mortgages (ARMs) were sidelined in favor of the more stable 15- and 30-year fixed-rate mortgage. But as rates rise, ARMs—which typically have lower initial rates than their fixed-rate cousins—have gained popularity.

“The rate on the fixed-rate mortgage has gone up much faster than the rate on the adjustable-rate mortgage,” says Joel Kan, deputy chief economist at the Mortgage Bankers Association. Over the past year through early December, the 30-year fixed-rate loan has more than doubled, from 3.11% to 6.49%, according to Freddie Mac. Meanwhile, the average initial rate of a popular 5/1 ARM was 5.48%.

The share of home buyers applying for an ARM has almost quadrupled since the start of 2022, coming close to 11% of all applications for the week ending November 11, according to the MBA. In October, ARMs accounted for nearly 13% of mortgage applications, the highest share since March 2008.

How ARMs work. As the name implies, most ARMs adjust after the initial lower-rate period ends. Once the adjustment period kicks in, the interest rate changes occur at regular intervals, such as annually or every six months, until the end of the loan term. The new rate is based on a pre-determined index and margin and, depending on market conditions, can make your monthly payment higher or lower than what you paid previously.

Diese Geschichte stammt aus der February 2023-Ausgabe von Kiplinger's Personal Finance.

Starten Sie Ihre 7-tägige kostenlose Testversion von Magzter GOLD, um auf Tausende kuratierte Premium-Storys sowie über 8.000 Zeitschriften und Zeitungen zuzugreifen.

Diese Geschichte stammt aus der February 2023-Ausgabe von Kiplinger's Personal Finance.

Starten Sie Ihre 7-tägige kostenlose Testversion von Magzter GOLD, um auf Tausende kuratierte Premium-Storys sowie über 8.000 Zeitschriften und Zeitungen zuzugreifen.

WEITERE ARTIKEL AUS KIPLINGER'S PERSONAL FINANCEAlle anzeigen
MAKING A DIFFERENCE IN THE LIVES OF DISABLED VETERANS
Kiplinger's Personal Finance

MAKING A DIFFERENCE IN THE LIVES OF DISABLED VETERANS

He suffered grave injuries in the line of duty. Now he helps other veterans who have disabilities.

time-read
2 Minuten  |
November 2024
DO YOU NEED UMBRELLA INSURANCE?
Kiplinger's Personal Finance

DO YOU NEED UMBRELLA INSURANCE?

A policy can protect you from financially devastating events.

time-read
2 Minuten  |
November 2024
Navigating Finances as a Blended Family
Kiplinger's Personal Finance

Navigating Finances as a Blended Family

Money matters can get complicated when two families unite. Planning is key.

time-read
4 Minuten  |
November 2024
BREAKING UP WITH YOUR BROKER
Kiplinger's Personal Finance

BREAKING UP WITH YOUR BROKER

Be aware of these challenges when you move your money to a new home.

time-read
5 Minuten  |
November 2024
CHOOSE A MEDICARE PLAN THAT'S RIGHT FOR YOU
Kiplinger's Personal Finance

CHOOSE A MEDICARE PLAN THAT'S RIGHT FOR YOU

Consider your health care needs over the long term as you weigh costs and coverage.

time-read
9 Minuten  |
November 2024
Keep Faith in These Stocks
Kiplinger's Personal Finance

Keep Faith in These Stocks

IN 1997, I coined the phrase “faith-based investing.” It has nothing to do with religion or with picking stocks at random.

time-read
5 Minuten  |
November 2024
OUR ESG PICKS ARE THRIVING
Kiplinger's Personal Finance

OUR ESG PICKS ARE THRIVING

Despite an ongoing backlash, our favorite stocks and funds focused on environmental, social and corporate governance issues had a good year overall.

time-read
9 Minuten  |
November 2024
MONEY MANNERS FOR THE MODERN AGE
Kiplinger's Personal Finance

MONEY MANNERS FOR THE MODERN AGE

The customs for splitting a restaurant check, purchasing a wedding gift, tipping and more have evolved. These guidelines can help.

time-read
8 Minuten  |
November 2024
ELECTION 2024: POLITICS AND YOUR PORTFOLIO
Kiplinger's Personal Finance

ELECTION 2024: POLITICS AND YOUR PORTFOLIO

Who wins the White House matters—but only at the margins when it comes to your investments.

time-read
2 Minuten  |
November 2024
YOUR GUIDE TO OPEN ENROLLMENT
Kiplinger's Personal Finance

YOUR GUIDE TO OPEN ENROLLMENT

With health care costs on the rise, it’s critical to select a plan that fits your needs at the right price.

time-read
7 Minuten  |
November 2024