Smart mortgage move
When taking an ARM makes good sense
Adjustable-rate mortgages (ARMs) give you a fixed rate for a period of time (from one month to 10 years). After that, the rate adjusts according to the ARM's underlying index plus some margin. ARMs typically carry lower introductory rates than 30-year and 15-year fixed-rate mortgages.
Here's when the move can be smart:
If you're not planning to stay in your house more than five to seven years -- maybe you relocate every few years for your job or you're buying a starter home before having kids - an ARM can offer you a better rate (and more cost savings) than a 30-year fixed-rate mortgage.
Taking an ARM also may be smart if buying a home makes good financial sense for you and there's a big spread between the 30-year loan rate and the ARM rate, especially in a high-rate environment since it's more likely rates will fall in the future when your ARM resets or you choose to refinance.
(Here's when it's not a great idea.)