There is always perfect timing in the world and sometimes, homeowners are lucky enough to hit the perfect time for an adjustable rate mortgage. Unfortunately, what that means for home buyers is that the current interest rates are extremely high and they won't want to box themselves in for years of high rates with their mortgage.
When interest rates are high, it is the perfect time to sign up for an adjustable rate mortgage. Chances are that when the interest rate comes up for review, the mortgage rate will be lower, and therefore your mortgage payments will drop. The most common terms on an ARM mortgage are 5:1, 3:2 and 1:1.
The first number is how many years the initial interest rate will be in effect until its first review and change and the second number is the frequency in years that the interest rate will be reviewed after the first review. When interest rates are high, going for the 1:1 ARM mortgage is probably the best bet.
With a 1:1 mortgage, the interest rate at the time of signing would only be in effect for one year when the interest rate would be reviewed and changed. Then, yearly after that, the interest rate would be reviewed and changed again.
In this case, it means that when the interest rates are low, you won't have to refinance your mortgage to take advantage of the new rates and thus won't incur refinancing costs. You will simply be able to sit back and enjoy the benefits of the lower interest rates.
