More homebuyers are taking out adjustable-rate mortgages, betting rates will drop in a few years. Getting one could save you thousands — but it's still risky.
Homebuyers seeking lower monthly payments are turning to adjustable-rate mortgages, or ARMs.Borrowers are betting rates will drop. Experts say taking out an ARM now isn't as risky as in 2008.
A few percentage points might not seem like a lot, but that difference can mean hundreds of dollars more in payments each month for a typical home.
And while ARMs have surged in popularity recently — they accounted for nearly 11% of mortgage applications during a week in mid-June, according to the Mortgage Bankers Association, despite never having passed the 4% mark in all of 2021 — they're still not nearly as prominent as they were in the early 2000s, when they sometimes made up more than a third of all mortgage applications, per the MBA.
First-time homebuyers, for example, can be ideal candidates for an ARM, particularly if they plan to stay in the home for only a few years, said Sarah Alvarez, a vice president of mortgage banking at William Raveis Mortgage in New York.
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