ARM stands for "adjustable-rate mortgage," and you may be surprised to learn that there are instances when it makes better sense than a fixed-rate mortgage. Let's look at the top 3 advantages of an ARM loan:
• Helps build equity faster. A substantial benefit of an ARM loan comes from the lower interest rate during the loan's fixed period. By the end of the five-year fixed period, a borrower will have paid off more of their loan balance than one who got a 30-year fixed mortgage.
• Pay less overall interest. Use the savings you've gained from the lower interest rate to pay more toward the principal.
• Advantageous for short-timers. If you plan to move in a few years, sell before your interest rates adjust to avoid a potentially high rate when it changes.