The No-ARM Rule
Avoid adjustable-rate mortgages
The No-ARM Rule is a framework for avoiding adjustable-rate mortgages (ARMs). ARMs can be risky because the interest rate can increase over time, resulting in higher monthly payments. The rule is simple: avoid ARMs and opt for fixed-rate mortgages instead.
- Adjustable-rate mortgages can be risky due to the potential for increasing interest rates.
- Fixed-rate mortgages are generally a safer option than ARMs.
- Avoiding ARMs can help individuals avoid financial risk and achieve financial freedom more quickly.
- Understand the risks associated with ARMsResearch and understand the risks associated with ARMs, including the potential for increasing interest rates and higher monthly payments.Pro tipConsider working with a financial advisor to determine the best mortgage option for your situation.WarningBe aware that ARMs can be risky and may not be the best option for everyone.
- Opt for a fixed-rate mortgageChoose a fixed-rate mortgage instead of an ARM to avoid the risks associated with adjustable interest rates.Pro tipConsider shopping around for different mortgage options to find the best rate and terms.WarningBe aware that fixed-rate mortgages may have higher interest rates than ARMs.
Jill's story
Jill and her husband took out an ARM, which ultimately led to financial difficulties and foreclosure.
OutcomeThey lost their home and experienced financial hardship.
Not understanding the risks associated with ARMs
Failing to understand the risks associated with ARMs can lead to financial difficulties and regret.
Not opting for a fixed-rate mortgage
Failing to opt for a fixed-rate mortgage can result in taking on unnecessary financial risk.
The No-ARM Rule was developed by Dave Ramsey as part of his Total Money Makeover program. The rule is based on the idea that ARMs can be risky and that fixed-rate mortgages are generally a safer option.
Source · BOOK
The Total Money Makeover Updated and Expanded