Adjustable Rate Mortgage (ARM)

Adjustable Rate Mortgages (also called ARMs) feature an interest rate that periodically adjusts with changing market rates. The initial interest rate on an ARM is usually lower than the lifetime interest rate on a fixed-rate mortgage (FRM).  Adjustable Rate Mortgages offer the lowest possible initial payments, which in many cases can boost your buying power.

Many homebuyers prefer an ARM because of its low starting interest rate for a specified period when compared to 15 and 30-year mortgages. The payments in the Adjustable Rate Mortgage vary over a period of time.  The adjustable mortgage rates should be considered only if the borrower is financially secure to handle the volatile interest rates. When the initial period is over, the interest rate is adjusted from time to time based on a pre-selected index. Adjustable mortgage programs for 1,3,5,7 and 10 years are available at relatively inexpensive rates.  The Annual percent rate on such mortgages may show an increase or decrease per year. If there is an increase in the rate index, there would be an increase in the monthly payments.

Loan Features

• Initial interest rate (and monthly payment) lower than fixed rate mortgages
• After initial period, interest rates are periodically adjusted in accordance with changing market rates
• Loan balance will reduce with every payment
• No cost to convert to a fixed rate mortgage during the early years of the loan

Adjustable Rate Mortgages are available in government, conforming and alternative loan programs.