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If I decide on an adjustable-rate mortgage, what is the worst-case scenario I could face when the rate resets?

by justinmdd390 from Newport, Tennessee. Mar 6th 2015 Reply


William J Acres (William_Acres)
#73 ranked lender in Arizona - 8,726 contributions

It depends on which rate you choose.. and which loan your going with.. For example.. if you go with a conventional 7/1 ARM, with a cap structure of 2/2/5. 7: the initial first 7 years, the rate cannot change. 1: The rate will change every year there after. 2: The most the rate can change on the FIRST adjustment period (beginning year 8). 2: The most the rate can change in any year after the first adjustment period. 5: The most your rate can change for the life of the loan.. so in this example, the worst case would be if you started out with a 3.75%, then the highest the rate can be is 3.75% +5%, for a total of 8.75%. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com

Mar 6th 2015
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Nancy J Releford (nancyreleford)
#4 ranked lender in Tennessee - 225 contributions

The only way I would suggest an adjustable rate mortgage is if you won't be staying in the property for more then 5 yrs. Fixed rates arte so incredibly low right now, & I doubt that they will stay this way for the next couple of years. There are a couple of different options out there. I am located here in TN, give my office a call to discuss your options.

Mar 6th 2015
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Phil Dumouchel (PhilDu)
#32 ranked lender in South Carolina - 2,240 contributions

With an ARM the rate can change anywhere from 1% (some VA and FHA ARM mortgages) to as much as 5% with certain conventional ARM's. Generally, it is 2% each year after the initial fixed period (3, 5, 7 or 10 years) and each year after with a cap of 5% max change. Usually, don't take an ARM unless you ar 95%+ certain you will be moving within that initial period OR your income will be changing significantly (ie. spouse going back to work) before the first adjustment.

Mar 6th 2015
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