Thinking about an Adjustable-Rate Mortgage? Read This First

If you’ve been house hunting in New Hampshire lately, you’ve probably felt the sting of today’s mortgage rates. Between higher interest rates and rising home prices across the Granite State, many buyers are starting to look beyond the traditional 30-year fixed mortgage in search of more flexible options. And one product that’s gaining momentum? Adjustable-rate mortgages better known as ARMs.

Now, if your mind immediately jumps to the 2008 housing crash, I hear you. That reaction is completely fair—but stick with me. Today’s ARMs aren’t the same as they were back then. Let’s break down why they’re making a comeback and why, in some cases, they could be a smart move.

Why ARMs Are Back on the Table

Back in the mid-2000s, some lenders handed out loans that weren’t sustainable, and when those adjustable rates shifted, homeowners found themselves underwater. Fast forward to today, and the lending world looks very different. Regulations are tighter. Lenders are required to assess whether you can still afford your mortgage even after the rate adjusts. In short there’s a lot more protection in place now.

This shift toward more responsible lending has opened the door for ARMs to become a viable option for the right buyer. And we’re seeing that trend in the data. According to the Mortgage Bankers Association (MBA), more buyers are choosing ARMs as they look for creative ways to navigate affordability challenges.

How ARMs Actually Work

Here’s a simple breakdown. A fixed-rate mortgage means your interest rate and monthly payment stay the same for the life of the loan. That predictability is why many people lean toward fixed-rate options.

An adjustable-rate mortgage, on the other hand, starts with a lower rate for an initial period say 5, 7, or 10 years. After that, the rate adjusts at regular intervals based on the market. That could mean your payment goes up if rates rise... but it could also go down if rates fall.

Pros and Cons of an ARM

Let’s talk about why some buyers in New Hampshire are giving ARMs a second look:

✅ Pros:

• Lower Initial Rate: Your starting monthly payments are often lower than a fixed-rate loan. That could mean affording more home or easing your monthly budget during the early years.

• Short-Term Advantage: If you plan to move, refinance, or pay off the loan before the adjustment period kicks in, you may never see that rate change.

⚠️ Cons:

• Rate Uncertainty: Once the fixed period ends, your rate could increase and with it, your monthly payment.

• Long-Term Risk: If you’re planning to stay put for the long haul, make sure you’re comfortable with potential rate hikes later on.

As Barron’s puts it, ARMs can be great if rates drop or you move before the adjustment period. But if you stay and rates rise, you could be looking at higher costs down the road.

So, Should You Consider an ARM?

ARMs definitely aren’t one-size-fits-all but they do offer some flexibility, especially when rates are high like they are now. If you’re a buyer who’s planning to move within a few years, or if you’re confident rates will drop and plan to refinance, an ARM might be worth exploring.

Just remember: no one has a crystal ball when it comes to future interest rates. That’s why it’s critical to sit down with a trusted lender and financial advisor to walk through all your options. Together, you can look at the numbers, talk through your long-term goals, and decide if an ARM makes sense for your situation.

Bottom Line

In today’s New Hampshire market, creativity is keyand for some buyers, ARMs offer a strategic way to find affordability in an otherwise tight landscape. But they come with trade-offs. The best thing you can do is get informed, weigh the pros and cons, and surround yourself with a solid team of professionals who can help you make the best decision for your future.

Want to talk through your options or get connected with a local lender I trust? Let’s chat I’m here to help you navigate your home buying journey, every step of the way.