Is this how a 10/1 30 year adjustable rate mortgage works?
Written By: admin on November 1, 2009
3 Comments
I want to do a 10/1 30 year adjustable rate mortgage. It is my understanding that the rate will remain the same for the 1st 10 years then adjust. Is this accurate, or can my rate change before the 10 years and if my rate remains the same, does that mean that my monthly payment will remain the same for 10 years, aside from tax and PMI increases?
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I agree with the first answer
10/1 ARM would mean that the rate is fixed for the first 10 years, then it will adjust every 1 year after that. I’ve never heard of a 10/1 ARM though.
There are some loans called interest first loans. For example, you would pay interest only for the first 5 or 10 years, then it would become a fixed rate loan for the next 30 years. These typically aren’t a excellent thought because the only offer payments a few dollars less than a standard 30 year fixed.
The best thing is to make sure you are working with a mortage broker that you can trust, and have them clarify it to you. Its hard to read all the fine legal print when buying a house, but scan through and look for key elements (maybe even highlight them for future reference). When I bought my house I scanned through the documents, and verified that the interest rate was what I expected, verified that it was a fixed rate, and verified what my monthly payments would be (and that they were fixed).
I have never heard of a 10/1 arm but yes you have the jest except the PMI doesn’t change unless you are a neg am mortgage. 5/1 arms are common place but you may be on an interest only note and that is really different if it recast in 5 years.
I am a mortgage banker in Tn & KY
Sounds like you’ve done your homework, but why with an ARM when you could go with a fixed rate mortgage? Today’s 10 year rate is nearly identical to the 30 year fixed rate. As a general rule, ARM (adjustable rates) do have their place but why choose a 30 year mortgage when there isn’t any real value in the 10 ARM vs. the 30 fixed.
Make life simple and go with the 30 year fixed.
But, it sounds like you know what you are doing. Yes, after 10 years your home loan will change and it will become adjustable according to market conditions.
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