Adjustable-Rate Mortgage in San Francisco
Prospective home buyers choose RA Real Estate Loans to explore the many adjustable-rate mortgages available to them in Canada. We are mortgage brokers with numerous reputable lender relationships, which enable us to offer our clients some of the lowest mortgage rates on the market.
To find out more about our value-driven products, give us a call at (650) 271-0404.
What Is an Adjustable-Rate Mortgage?
An adjustable-rate mortgage is called "adjustable" because the interest rates are subject to change. Basically, an adjustable-rate mortgage can be seen as a collection of short, fixed-rate terms, with the lending rate being modified—either up or down— each year, according to the market.
Usually, adjustable-rate mortgages begin with an initial fixed-rate term with a below-average interest rate. This offers home buyers a certain level of stability, knowing they are guaranteed cost savings for a period of time before their rates begin to adjust yearly.
How Does an Adjustable-Rate Mortgage Work?
An adjustable-rate mortgage, also called an ARM, works according to its structure. Some of the most popular ARM structures are:
The first digit in these examples represents the initial fixed-rate term. In the above structures, homebuyers agree to pay a fully disclosed, usually below-average rate of interest for the first 3, 5, or 10 years of their loan. After that period ends, their monthly payment will increase or decrease each term, in this case, each year (represented by the second digit) until their loan is paid off.
What Drives Change in Adjustable-Rate Mortgages?
All adjustable-rate mortgages fluctuate based on an index that mimics the economic climate. At the end of each term, your lender or bank will calculate your new monthly payment based on how the index has changed.
There are many varieties of indexes that operate slightly differently to one another, which is why it’s important to understand how yours works. At RA Real Estate Loans, we can walk you through the ins and outs of all your index options and help you choose the most economical mortgage for your budget and needs.
What’s the Difference Between Adjustable-Rate Mortgages and Fixed-Rate Mortgages?
Whereas the monthly payments in an adjustable-rate mortgage change based on an index, the monthly payments in a fixed-rate mortgage are locked in at the time the contract is signed.
What Are the Pros and Cons of an Adjustable-Rate Mortgage?
Adjustable-rate mortgages are advantageous because of their cost-saving potential—if your interest rate decreases, you can save thousands of dollars over the lifetime of your mortgage. However, the risk you take is that your payments can also increase. To mitigate loss in this scenario, we advise researching the different rate caps available in ARMs, which limit the amount your interest rate can increase each term.
Ultimately, there is no right or wrong choice when it comes to adjustable- or fixed-rate mortgages. The decision comes down to your risk tolerance and how you predict the market will change in the future.
Benefit from the Cost-Saving Potentials of an ARM
The cost-saving potential of ARMs makes them an attractive option for prospective applicants. In San Francisco, we help our clients research the ideal mortgage to suit their lifestyle, financial situation, and future goals.
For in-depth assistance on your road to homeownership, contact RA Real Estate Loans today.
RA Real Estate Loans’s years of expertise, help find homebuyers mortgages with suitable rates.Learn More
Crunch the numbers and explore your mortgage options!Learn More
We shop for the best mortgage option at no charge to you.Start Today