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Adjustable Rate Mortgage

Adjustable Rate Mortgage

An adjustable-rate mortgage (ARM) is a mortgage in which the interest rate changes over time. ARMs offer lower rates for an introductory period before the rate is periodically reset according to market conditions. An ARM may be ideal for you if you are not planning a long-term stay in your new home.

Here is what you need to know:

  • An ARM’s fixed-rate introductory period lasts three, five, seven, or 10 years. For example, a 5/1 ARM has a fixed rate for five years then resets once a year for the remainder of the loan.
  • The rate is determined by an interest rate (which adjusts annually based on a money market index) and a margin (which is added on top of the interest rate). 
  • Predetermined caps on the rate regulate how high or low it can be.
  • ARMs are often chosen by borrowers who plan on moving before the adjustable-rate phase begins.

Does an ARM sound right for you? If so, please contact us today.

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