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.
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.
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.
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.
Get Started on Your Journey Home
David H. Stevens, CMB, (Dave) is a 36 year veteran of the Mortgage Banking industry. Dave served as the President and CEO of the Mortgage …
Refinancing your FHA loan to a conventional mortgage may clear room in your monthly budget, especially with interest rates hovering at historic lows. FHA Mortgage …