Adjustable-Rate Mortgage in Oakville

With a diverse array of mortgage plans available in Oakville, it can be difficult for prospective homebuyers to assess their options accurately. At eMortgage Solutions, we take the time to walk our clients through our products one by one. We’ll work collaboratively with you and our extensive lender network to find the ideal match for your financial situation and goals.

Call us today at (416) 258-0156 to set up a consultation with one of our agents.

What Is an Adjustable-Rate Mortgage?

An adjustable-rate mortgage is a loan in which the interest rate adjusts periodically according to the market. Your monthly payments follow your interest rate and will go up or down alongside it.

Adjustable-rate mortgages, also called ARMs, are a naturally appealing choice because they offer significant cost-saving potential.

How Does an Adjustable-Rate Mortgage Work?

Adjustable-rate mortgages work differently depending on their structure. Some examples of ARM structures are:

  • 3/1
  • 5/1
  • 7/1
  • 10/1
  • 5/5

The first number in these examples represents an initial, short-term, fixed-rate period. For instance, if you have a 3/1 ARM, your interest rate will be locked in for a term of three years before it begins to adjust. The second number represents the frequency with which the rate will adjust after the initial fixed-rate term ends. In the case of a 3/1, the rate will change every year until the loan is paid off.

Usually, these initial fixed-rate periods are offered at below-average interest rates, which can serve as an incentive for homebuyers to guarantee a low monthly payment for the first few years.

What Drives Change in Adjustable-Rate Mortgages?

An index, chosen by your bank or lender, is what drives the change in your interest rate. There are many different types of indexes, but ultimately, they all indicate general market conditions. At the end of your term, your bank or lender will take this index, add their margin of profit, and the sum will be your new rate of interest for the following term.

At eMortgage Solutions, our clients appreciate our step-by-step assistance. We’ll explain clearly how your index operates and help you calculate the possible effects it could have on your mortgage payments.

What’s the Difference Between Adjustable-Rate Mortgages and Fixed-Rate Mortgages?

The primary difference between an adjustable-rate mortgage and a fixed-rate mortgage is straightforward. As the terms suggest, an adjustable-rate mortgage has a rate that is subject to change, whereas a fixed-rate mortgage has a rate that is fixed in place for the entirety of the contract.

What Are the Pros and Cons of an Adjustable-Rate Mortgage?

The adjustable nature of an ARM offers both risk and reward. On the one hand, you’re taking the risk that your payments may increase. On the other hand, your payments may decrease, potentially saving you money on interest in the long run.

Book a Consultation with Our Top Mortgage Brokers

At eMortgage Solutions, we’re immensely proud to be among the country’s top mortgage brokers. Our singular mission is to match you with the right financial solution for your unique needs. Book a consultation with us today to find the best value product in Oakville.