Why I Love My Adjustable Rate Mortgage?

Okay so most people say "ugh no way, awful, too risky." I say hold on, it depends on why you are getting one in the first place and what type of adjustable mortgage. I'm going to discuss the different types of adjustable mortgages, the pros and cons, and why I personally chose an adjustable mortgage.

First an Option-Arm mortgage, which gives you the opportunity to pay as much or as little as you want per month. If you don't pay all the interest it just balloons up and you owe more than the house. Pro, very low monthly payment. Con, obviously you can owe more than your house is worth. Whose it for? People who have variable incomes, and maybe have some lean months, but some great times, so they can pay it off. Great for people who maybe have huge bonus or commission checks. Not great for people stretching to buy a home. Also good for people interested in paying off the home super fast and a low interest rate will allow them to achieve this goal faster.

Second, Interest-Only Arms, a mortgage where you only pay the interest on the loan for a fixed period of time. Here typically you have a set number of year 3, 5, or 7 years where you only pay the interest on the loan. Then the loan reamoratizes and you have to pay the principal down faster in the remaining years, along with potentially being hit with a higher rate at the new adjustment. Pro, again a lower monthly payment. Con, if housing prices go down you've built no equity up to cushion yourself in case you need to sell. You could owe more than the home is worth. This is mostly for times when homes are going up, if it's going down, you may not have a valuable asset at the end. So it's probably for people who like risk, are going to move or have an increase income soon, and the market is going up instead of down. This also works for people who work for commission and thus need more flexibility with their payments. However when they have extra money they pay down the mortgage first.