Understanding Adjustable Rate Mortgages: The Right Choice for You?

Adjustable Rate MortgageThose who have a fixed rate mortgage know their interest rate is set for the duration of their mortgage. It might feel safer because it is predictable and won’t change. On the flip side, the words “adjustable rate mortgage” carry with them some level of uncertainty. What does adjustable really mean? How much might my rate adjust? Will I be at risk of not being able to pay my mortgage or going into default?
Before you dismiss the idea of an adjustable rate mortgage, or ARM, it’s important to take the time to understand how they really work. “The ARMs of today are not like the early 2000s – they are ‘not your parents’ ARM,’ so to speak,” says Michael Kellman, Senior Vice President of Consumer Lending at North Shore Bank. “Today, there is a more conservative structure in place to protect the consumer and, because of that, it’s really important to us to make sure our customers understand the potential benefits an ARM can offer for their specific needs.”
Key Benefits of ARMs
  • Lower rates. In this current market, where we’re seeing interest rates trend somewhat upward, rates for ARMs are lower than fixed rates. You can always find our current rates here to compare.
  • Today’s ARMs are different. ARMs are now underwritten more conservatively than they were in the past to help protect home buyers who choose them, delivering more peace of mind that payments remain affordable down the road.
  • Adjustable doesn’t mean unlimited. Rate adjustments on ARMs are capped both annually and over the lifetime of the mortgage. Rates don’t just jump up by unpredictable or exorbitant amounts. Our team clearly communicates what customers can expect over the term of an ARM so they are fully informed on when rates can increase and by how much.
  • Buying Power & Equity Building. Because rates are lower yet still retain some level of predictability with an ARM, often this increases options for home buyers. In short, choosing an ARM can mean more house for your money. It also allows you to build equity faster: with a lower interest rate, you pay more on principal and less on interest.
  • Short-Term Flexibility. If you know you plan to stay in a home only five years or fewer, an ARM is a great way to get a lower rate mortgage and pay down your principle faster.
For us personally, we love that the ARMs we provide keep your loan local. Often, when you choose a mortgage, you work with a local lender who then sells your mortgage off to a larger bank that you don’t get to choose. About 85% of our mortgages are currently ARMs – a testament to their popularity – and these loans stay in our portfolio here locally. Not only does this allow us more flexibility in the options we can provide for you, but you can also rest assured you’ll receive the same personalized local service and dedicated team you’ve come to expect from North Shore Bank.
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Life is full of uncertainty, but your mortgage – even an ARM – can be beneficial and predictable. Our mortgage lending team prides itself on providing the best information and options to help you decide on the mortgage program that is best for your unique situation. Get in touch today so we can tell you more about how a North Shore Bank ARM can benefit you and your family. Our team members are always happy to discuss your individual needs and goals and answer your questions by telephone, email or at any branch office.