Adjustable Mortgage

An Adjustable Rate Mortgage (ARM) starts with an introductory or teaser interest rate that’s often lower than a traditional fixed-rate loan. The introductory rate period can last anywhere between the first 5, 7, or 10 years of the loan. During the initial period, the interest rate and monthly payments don’t change. After the initial period, the rate adjusts periodically based on the index (rate set by market forces) either once a year or every 6 months, depending on the ARM terms.

Benefits of an Adjustable-Rate Mortgage:

• Lower initial rate for the first few years means monthly payment savings
• Could offer lower interest rates than fixed-rate loans
• Rate adjustments have caps to keep them from going too high
• The interest rate and monthly payment may increase or decrease during the adjustable period. Homebuyers should consider their financial situation carefully and be prepared for potential monthly payment adjustments in the future.
• Good option for buyers who plan to move or refinance before the initial rate period ends