If you are a borrower who is willing to accommodate your finances and budget according to fluctuating mortgage rates in order to buy your dream house, then a Pegasus ARM could be for you.
In an Adjustable Rate Mortgage, a fixed rate is set for an initial defined number of years of your mortgage term, once this initial period is over, the rate will begin to change on a yearly basis. Adjustable Rate Mortgages are typically available in two terms, 5/1 or 7/1. This means the initial fixed rate period could be 5 years or 7 years before your your rates start to change every year.
You will have a stable and fixed repayment amount during your initial 5 or 7 years, regardless of the changing market conditions. After this period ends, your rate and repayment may rise or fall every year depending on the market conditions. In case your mortgage have a rate increase, your mortgage payments will also increase.
Make Sure You Can Bear Increased Rates
You can never set expectations regarding what the condition of the financial market could be tomorrow, in a day, weeks, months or years. The state of the economy and the financial market is always changing, making for mortgage rates to adjust accordingly. For this type of rate, we always advise our client that if they know for a fact that they have the resources to not only be able to repay their mortgage loan at the rate they receive it, but also to be able to repay it in case of an increase in the rate, then opting for an adjustable rate mortgage can be the right fit for them.
Rates May Fall Later
Whilst it’s true rates may rise after a set period, they may also drop at the end of the fixed rate period. This will result in you having a lower payment and paying less interest on your mortgage. If you want to take advantage of potentially reduced rates in the future, then consider choosing the adjustable rate mortgage offered by Pegasus Mortgages.
Interest Rates Are Lower at Start
You never know what the rates would be during the later periods, but you can benefit from this type of mortgage as the beginning rates can be quite low. You can make low payments and save on high interest costs.
