Lower Initial Rate: Starts with a lower interest rate compared to fixed-rate mortgages, which can reduce initial monthly payments.
Adjustable Terms: Interest rate adjusts periodically based on market conditions, which can lead to changes in your monthly payment.
Potential Savings: Opportunity to save money in the early years with a lower initial rate, especially if you plan to move or refinance before the first adjustment.
Varied Adjustment Periods: Available with different adjustment schedules, such as annually, every 5 years, or other intervals.
Rate Caps: Features limits on how much the interest rate can increase at each adjustment period and over the life of the loan, providing some protection from significant rate hikes.
Initial Fixed Period: Often includes a fixed-rate period (e.g., 5, 7, or 10 years) before the rate begins to adjust, offering stability in the initial years.
Potential for Lower Costs: May offer lower overall costs compared to fixed-rate mortgages if you take advantage of the lower initial rate and move or refinance before the rate adjusts significantly.
Requires Monitoring: It's important to stay informed about market trends and potential rate changes to manage your loan effectively.
