Ask the expert
We've found our dream home. Our lender suggests we finance with an open end adjustable rate mortgage. Is that a good idea?

	That depends on your personal circumstances. The open end mortgage is a legitimate instrument and works well for some people. I personally would rather have a regular ARM or a fixed rate 15 or 30 year mortgage.
	
	Regardless of the type of loan you choose, your dream home will require a jumbo mortgage, which means you'll borrow at least $625,000. Interest wise, the  jumbo can be a good deal, sometimes  having a lower interest than a regular 30 year fixed rate mortgage. 
	
	Today, adjustable rate mortgages account for 30 percent to 40 percent of private jumbo loans at Bank of America and about half of the private jumbo loans by NASB Financial, the holding company of North American Savings Bank. 
How ARMs work
	All ARMs have a fixed rate for a certain number of years before they become variable, usually resulting in a significant increase in the interest rate. A five year fixed rate is typical, but the time period can be as long as 10 years. 
	
	Note that ARMs got a bad name during the housing bust, because borrowers couldn't afford the higher interest when the original terms expired. 
	
	Since you are a high net worth buyer, your risk of being unable to make monthly payments when the interest rate rises is small. 
	Open end mortgages
	Some jumbo home loan buyers do opt for an open end mortgage, which is an entirely different type of loan.
	
	It's a mortgage that allows the borrower to increase the amount of the mortgage at a later date. The total outstanding principal must not exceed a certain amount, such as 80 percent of the appraised value of the home.
	
	The loan is similar to a home equity line of credit, which allows homeowners to pull equity out of their homes as well as make larger payments on the property.