Pros and Cons of Adjustable Rate Mortgages

Adjustable rate mortgages get their name from the fact the interest rate resets from time to time based on market conditions. This added risk comes with the positive fact that such loans usually start out with an interest rate lower than you will find with a fixed rate mortgage. This means you can borrow more money for your profile. The con of this loan is two fold. First, the initial rates are often known as teaser rates and are very low. They then reset after a couple of years to a higher rate regardless of what the market is doing, which can put a strain on your finances. An addition strain occurs if general interest rates go up as they are now. Your monthly mortgage payment can reset to the point where you can’t meet the payment obligation. Hello foreclosure!