Discover the difference between ARM and 30-year fixed mortgages.
Are you looking to buy a house in San Diego this year and want to figure out if you should get a mortgage? Specifically, should you choose an ARM or a 30-year fixed mortgage? Let’s explore the difference between the two and determine which option makes more sense in today’s market.
A 30-year fixed mortgage is exactly what it sounds like. Your interest rate remains unchanged for the next 30 years, and so does your monthly payment. On the other hand, ARM loans have evolved, and we now typically offer short-term fixed-rate ARM loans, such as the 5-year, 7-year, or 10-year options. These shorter-term ARMs often come with lower rates, especially in the jumbo loan category.
“Should you choose an ARM or a 30-year fixed mortgage?”
Choosing an ARM loan is beneficial in a high-interest rate environment, where you can secure a lower interest rate for a shorter period, like five, seven, or ten years. During the fixed-rate period, the loan functions similarly to a 30-year fixed mortgage. However, once the fixed period ends, it transitions into an adjustable-rate mortgage.
We’re seeing a trend where many clients who would have traditionally opted for a 30-year fixed mortgage are now shifting towards the ARM product to keep their payments lower while waiting for interest rates to normalize. These borrowers often have a plan in place to refinance in the future, as many predict that interest rates may decrease and stabilize in 2023.
Considering the price points in San Diego compared to the rest of the country, this option holds great appeal for homebuyers. If you’re interested in more tips and tricks on how to succeed in the San Diego real estate market and make the most of your mortgage, reach out to us by phone or email, and we’ll be happy to assist you.
