An adjustable rate mortgage (which is usually called ARM) is a type of mortgage that enjoys great popularity among the clients of the banks. This type of mortgage has several very specific characteristics that greatly differ from other kinds of mortgages. A beneficial point of this mortgage is the possibility to have the interest rate changed from time to time depending on the index, and consequently, your payments can get higher and higher. However, there is a small disadvantage of the adjustable rate mortgage. A client has to bear in mind different figures like rates, discounts, indexes and many other ones that are very flexible unlike in the situation when the rate is fixed.
As a rule, an adjustable rate mortgage clients get their first interest rate lower than those with the fix-rate mortgages. This initial period can last from 1 month up to 5 years or sometimes even longer. This period during which the rates are changing is called the adjustable period which gives the name to this type of mortgage. The term of the adjustable period gives the name to the types of mortgage, e.g. 1-year ARM, 3-year ARM, 5-year ARM, etc. Even more, those who get such mortgage get more pocket money than the others with the fixed-rate mortgage even for the same amount of money. To top it all, the ARM can be not so expensive for a longer period of time than those with the fixed rate.
However, there some disadvantages that have to make you think whether to take ARM or not. Being lucky in the beginning one can be disappointed later when he or she finds out that the payments are higher than before. So you have to think carefully and consider your future ability to pay. So, one has to be aware that ARM is the direct way to increase considerably your future monthly payments. Weighing all pros and cons of ARM one can take the right decision about the correct type of mortgage.