ADJUSTABLE RATE MORTGAGE
Adjustable Rate Mortgages (ARM’s)
An Adjustable Rate Mortgage (ARM) offers a great deal of flexibility to borrowers. ARM’s can offer a home buyer a way to save money on their loan in the short term, as they typically start out with a lower introductory interest rate than a typical 30-year fixed rate loan. An ARM loan has an initial low fixed interest rate for a pre-defined term (e.g. 3-years, 5-years, 7-years, etc.), after which the rate becomes adjustable and the monthly payments can go up or down based on what interest rates are doing. The decision to go with a variable rate mortgage or one with a fixed interest rate will depend upon your personal situation. An ARM loan may be a good option for a home buyer who does not plan on being in their home for a long period of time (e.g. less than 5 years).
Because interest rates have remained artificially low in recent years in historical term, ARM loans have not offered much of an advantage in savings compared to the risk of rates going higher. However, as rates begin to go back up toward historical norms, ARM loans will once again be an option worth considering.
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The Benefits of ARM Loans
- You can save money in interest over the initial introductory fixed rate period of the loan.
- Starting interest rate is typically lower than other types of loans. (see Today’s Rates)
- Buy a home with as little as 5% down payment on a Conventional ARM.
- Refinance up to 95% of your primary home’s value. Cash-out refinance is limited to lower loan-to-value depending on property type.
How ARM Loans Work
- An ARM loan has an initial low fixed interest rate for a pre-defined term, after which the rate becomes adjustable and the monthly payments can go up or down based on what interest rates are doing.
- The amount and ARM loans rate can adjust is capped for each adjustment term (typically 1 year) and over the life of the loan.
- A common option is the 5/1 ARM where the interest rate is fixed for the first 5-years of the loan term.
- Despite the low introductory rate, you must qualify based on what the full interest rate and monthly payment could be.
Why you should get your home loan with the loan geeks
- You don’t have to sacrifice great service to get a great rate on your home loan. We offer a Full Service home loan experience! (see Today’s Rates)
- With our state-of-the-art online application process, you’ll get a fast, efficient, completely online process that is available 24/7/365 from application to closing. And you can monitor the progress of your home loan throughout the process.
- Our Loan Geeks Home Loan Experts are available to answer your questions by phone and email. We are here to assist you through the entire home loan process.
Interested in learning more about adjustable rate mortgage loans?
Is an adjustable rate mortgage right for you?
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