Adjustable Rate Mortgage Loan
What Is an ARM?
An Adjustable-rate mortgage also referred to as an ARM, starts with an introductory interest rate that lasts a set period of time depending on term you choose and then adjusts once a year.
Normally shorter fixed periods have lower initial interest rates, meaning a 5 year adjustable rate mortgage will have a lower interest rate than a 7 year ARM program.
How adjustable rate mortgage (ARM) program works?
- Receive a low temporary fixed rate for a selected adjustable term. At the end of your selected term your rate will increase or decrease based according to market conditions.
- There is a limit to how much your rate can adjust. This limit is called a cap, your interest rate cannot exceed the cap at any time of adjustment.
- Adjustable programs offer the flexibility of different terms. The most common terms are fixed for 10, 7 or 5 years before adjusting, lower fixed terms provide lower rates that are amortized over 30 years providing an initial low monthly mortgage payment.
Benefits of ARM Loans
- Adjustable rate programs usually provide much lower interest rates than fixed mortgage programs.
- Adjustable rate mortgage’s usually have low introductory interest rates and carry low monthly fixed monthly payments during the fixed period.
- It’s best to plan ahead when getting an adjustable rate home laon. By freeing up funds for other investments and obligations while, fully understanding what to expect when the initial fixed rate begins to adjust.
- A great program for stable or increasing income, you could take advantage of a lower initial rate.