Loan Options

Adjustable Rate Mortgage (ARM)

Adjustable Rate Mortgage

An adjustable-rate mortgage (ARM) is a type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan. With an adjustable-rate mortgage, the initial interest rate is fixed for a period of time. After this initial period of time, the interest rate resets periodically, at yearly or even monthly intervals. ARMs are also called variable-rate mortgages or floating mortgages.

Hybrid ARM

A hybrid ARM offers potential savings in the initial, fixed-rate period. Common ARM terms are 3/1, 5/1, 7/1 and 10/1. With a 5/1 ARM, for example, your introductory interest rate is locked in for five years before it can change. That gives you five years of predictable, low payments.

Flexibility

An ARM can be a good idea if your life is likely to change in the next few years — for instance, if you plan to move or sell the house. You can enjoy the ARM’s fixed-rate period and sell before it ends and the less-predictable adjustable phase starts.

The interest rate for ARMs is reset based on a benchmark or index, plus an additional spread called an ARM margin.

ARM Pros

ARM Cons

Certificate of Eligibility Required.
* VA loans require a non-refundable VA funding fee at closing. Maximum VA loan amounts vary by county.
** Eligible borrowers using a VA Jumbo Loan are required to pay 25% of the difference between the sales price of the home and the applicable VA loan limit as a down payment. 
Talk to a George Mason Mortgage loan officer to learn more.

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