The popularity of adjustable rate of mortgage (ARM) loan programs have been on the rise recently, due to the change in market demand. Most American family stay in their homes for only 5-10 years before moving, therefore an adjustable rate of mortgage loan can prove to be quite advantageous. ARM loans are a great choice for homebuyers whom are looking to only own their property for a few years or will be getting promoted soon and will be able to handle a higher monthly payment over time.
An adjustable rate of mortgage is a mortgage loan where the interest rate on the note is periodically adjusted based on one of many indexes.
Indexes include:
- Treasury notes and bills
- The Federal Housing Finance Boards National Average mortgage rate (which is an average rate for loans closed)
- The average interest rate paid on jumbo certificates for deposit
- The costs of funds for the specific lender
Adjustment Period
With most ARMs, the interest rate and monthly payment are fixed for an initial time period such as one year, three years, five years, or seven years. After the initial fixed period, the interest rate can change every year. For example, one of our most popular adjustable rate mortgages is a five-year ARM. The interest rate will not change for the first five years (the initial adjustment period) but can change every year after the first five years.
As an adjustable rate mortgage, the finances of this type of loan are constantly fluctuating. Advantages of an Adjustable Rate of Mortgage are the lower initial rates, ability to qualify for a larger loan or for a loan faster, ideal for home buyers whom only intend to stay in the home for a few years. To see if this loan is right for you, please feel free to give us a call at 1-800-880-4202. Our loan officers will be able to give you new insight on what could possibly be just the mortgage you were looking for!
