When mortgage rates are close to 7%, even a small difference in the rate can matter to a buyer’s monthly budget. That is one reason adjustable-rate mortgages, often called ARMs, are getting more attention. I have had several buyers use an ARM this year.
An ARM typically starts with a rate that stays the same for a set period. With a 7/6 ARM, for example, the initial rate lasts seven years and can then adjust every six months. If the starting rate is lower than the rate on a comparable fixed-rate loan, the initial payment may be lower, too.
I understand why that appeals to buyers. If you are buying a home in Colorado Springs, Monument, or the surrounding area, you are considering more than the mortgage payment. Property taxes, homeowners insurance, HOA dues, maintenance, and the cash you need at closing all affect what feels comfortable.
The question is what happens after the ARM’s initial period ends. The rate can move up or down under the terms of the loan, and your payment can change with it. A lower starting payment deserves a closer look if a higher future payment would strain your budget.
Before choosing an ARM, I would want to see two loan scenarios side by side: the ARM and a fixed-rate mortgage for the same home. Compare the starting payment, upfront costs, how long the ARM rate stays fixed, when it can change, and the highest payment allowed under its terms. I would also be careful about a plan that only works if you can refinance or sell before the first adjustment. Neither option is guaranteed.
There may be other ways to improve affordability on a particular home. Depending on the property and the seller’s circumstances, we can explore whether seller concessions could help with eligible closing costs or a rate buydown. Concessions are negotiated as part of an offer and are never a given.
An ARM has worked for several of my buyers this year, but that does not make it the right fit for everyone. My lending partner, Matt Wentz with Speak Straight Mortgage, can walk you through the financing options and show what each one means for your payment and cash to close. I can help you evaluate the home, its costs, and the offer strategy so you can make a decision that fits your circumstances.
