Adjustable-Rate Mortgages: What to Consider Before Applying

Adjustable-rate mortgages (ARMs) are one of the options you can go for once you apply for home loans. However, most applicants avoid this outright and opt for fixed rates because they don’t want to risk their financial stability. On the flip side, an ARM can be beneficial under certain circumstances, like particular market conditions and refinance rates. To ensure you weigh the pros and cons properly, use this article as your guide before opting for any loan program. 

The Benefits and Downsides of Adjustable-Rate Mortgages

When you compare different mortgage rates, the first thing you may notice about ARMs is they have a significantly lower interest than other house loans. Because of this, there are more budget-friendly monthly payments within a time frame. With the amount saved, you can reinvest them into other more secure financial assets, like mutual funds and time-deposit accounts. Just ensure you don’t forget to pay as you benefit from smaller initial payments and interest rates, or your mortgage can default. 

Upon satisfying ARMs starting payments, you may see the interest rate increase or decrease. Unfortunately, it can be unpredictable and difficult to perceive what will happen in the future. Although there are set rate caps to safeguard your finances, you may not have enough money to pay them back. Worse, if you fail to refinance or sell your home, foreclosure may just be around the corner. 

How Can I Make My Adjustable-Rate Mortgage Work for Me? 

Against all odds, a couple of ARM clients do reach financial stability and get the house of their dreams by employing best practices to avoid losing assets and address any gaps easily. They focus on comparing and finding the lowest mortgage rates in the market, and they also find ways to eliminate the mortgage before the fixed-rate time frame expires. 

This approach is simple because ARMs seem to be 1.5 points less expensive than fixed-rate options, making them fairly easy to spot and acquire. Just ensure you keep an eye out for the daily rates and loan market trends while coordinating with loan officers to get in an investment-worthy position. 

Additionally, keep your credit score up and sustain your means of income to easily meet the ARM’s terms before the adjustable rate starts. Once you accomplish these tasks, you can expect to be in a better position from a financial standpoint. 

What Are the Tell-Tale Signs That an Adjustable-Rate Mortgage May Not Be for Me? 

Aside from the implied pressures that come with managing an ARM, if you know that your source of income is not stable, it may be best to go for a fixed-rate loan. You may even want to put a pause on your housing plans for a while until acquiring a more secure job opportunity. Doing this allows you to build your savings. If fixed-rate loans are also significantly lower than ARMs, consult with a reputable loan officer or provider to make well-informed, long-term decisions.  


Adjustable-rate mortgage programs may have some challenges you need to consider, making financial management a bit tougher than fixed-rate mortgages. However, it can yield favorable results if you study the market well and keep the information mentioned above in mind. Meanwhile, to ensure you make an informed decision, identify with experts like our team to assist you and avoid as many common pitfalls as possible. 

PaloRATE is your source for the best mortgage rates, allowing applicants like you to find the most reasonable financial option based on your needs and preferences. We can offer fixed, adjustable, and other types of mortgages. Contact us today at (206) 719-2694 if you have any further inquiries or browse through our website by checking our available resources.