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Consumers have many different criteria in mind when they choose a loan to fund their home purchase. Some consumers, attracted by a low starting rate, agree to adjustable rate mortgages. Adjustable rate mortgages (ARMs) are variable-rate loans that are tied to federal interest rates. They often start out very low (in a low-interest environment), but as interest rates increase, so do the rates of the ARM.
Some consumers are initially dazzled by the low rate of an ARM and agree to this type of loan because they anticipate that the raises they receive at work will keep pace with inflation and interest rate increases, making the possibility of an ARM interest rate hike no big challenge. Unfortunately, this is not always the case, and ARMs can be detrimental to your financial health.
When you compare refinance loans, be sure to look at fixed rates so that you can get out of the vicious and unpredictable cycle of an ARM. Refinancing is a powerful solution for those who are locked into an ARM and are having difficulty adjusting to its varying interest rate. They can offer you a fixed mortgage payment that you can count on for years to come.