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Over the past year, there has been a lot of info about Adjustable Rate Mortgages (ARMs).  Several news outlets and publications have stated that adjustable rate mortgages are the reason for the mortgage crisis that started in 2008.  Many also state that ARM mortgages are the reason for the high foreclosure rate.

Some of the information is true, ARM loans have acquired a lot of bad press.  Yes, ARM loans are not for every homeowner and you should only contemplate an ARM mortgage as long as you understand the terms of the mortgage.

Below are some reasons why one would even consider an ARM loan.

First off, you must ask yourself how long you plan on staying the mortgage or keeping the home.  The common person stays in their home about 5-7 years before they sell or refinance their house.  The typical home owner only keeps their mortgage loan for about 5 years as well.

Since several people only keep their home loan for a short period of time, that was the fundamental design on an ARM loan program.  The ARM loan offers you a lower rate than a FIXED rate mortgage for a period of time.  Once the lock period ends, then the rate can change.

Keep in mind that how long you plan on retaining your loan or house can play an important part in your choice to go with an ARM or a Fixed rate loan.  For example, if you plan on keeping your residence for 5 years and the current FIXED rate is 5% while an ARM rate is 4.5%, then by going with a 5 year ARM could save you thousands over the first 5 years.

A FIXED rate loan is a great option for people that plan to keep their property for a longer period of time.  If you are uncertain of how long you plan on keeping your property, then a FIXED rate mortgage loan would give you the peace of mind of knowing your rate and monthly mortgage payment would not change.

ARM loans are a good option if you fully grasp the mortgage term itself and are used for the proper reasons.  A few individuals that have ARM loans now have actually seen their interest rate decrease.  The terms of how the rate changes will be in the mortgage note.  Each ARM loan is not the same, so it is important to understand how the rate is calculated once the loan goes into the adjustment period.

Here are the reasons to never do an ARM loan.  If the only way you can meet the criteria for the home loan is to go with an ARM loan, this is not a good reason to do an ARM loan because once the mortgage adjust, you might not be able to make the new monthly mortgage payment.

For the most part, what got people into problems with the ARM loans is that they did not comprehend how their monthly payment would be affected once the mortgage went into the adjustment period.

David White is a Sr. Mortgage Consultant who assists his clients with their Dallas home loans. He has over 12 years experience with Southlake home loans.