An ARM (Adjustable Rate Mortgage) has several disadvantages, and they should all be studied before going into a home loan deal with this particular program. If you are on a tight budget, then is definitely not for you. Payments can increase month to month. Payments can vary month to month by a couple of hundreds of dollars to thousands, depending on your program. Your rate is adjusted with escalation. That means when the FED increases their rates... your payments go up, and up.
The only way to really win in an ARM program is to hope that interest rates go down, while your home value goes up. History has shown these two events barely occur at the same time. On one hand if your home values are going up, that mean sellers are selling at a higher rate, and buyers are getting hit hard with fees and high interest rates since it is a seller's market. If interest rates are going down, that means there are more buyers out there than there are sellers. This in return drives home prices up.
An Adjustable Rate Mortgage is best if you are planning on just investing in your home, and don't plan on staying in it for more that 5 years. You are gaming, that the home values will go up, and you can cash out before the program comes due. Millions of people have try playing this game, and you really don't want to. The simple case is that the financial game is not to be played with when you consider it is your family's financial immovability that you are gaming with when you choose an ARM home loan program. Think long and hard on how you are going and calculate if you will be able to financially pay a monthly variable payment. adjustable mortgage rate
