What is an Adjustable Rate
Mortgage?
In mortgage terms, an ARM can't throw a baseball, but it may help you buy a home with a lower payment. An ARM is an Adjustable Rate Mortgage, meaning the interest rate adjusts on a regular schedule to correspond to current rates, usually once or twice a year. The interest rate and payments rise and fall with the index, such as the Treasury Bill rate, Prime rate or LIBOR. You agree to the amounts and times of adjustment when you set up the loan. Also, ARMs come with an interest rate cap that limits the total amount your rate can change over the life of the loan.
Why would I choose an ARM over a fixed rate mortgage?
An Adjustable Rate Mortgage can be appealing because it offers you a lower interest rate than a conventional loan, which in turn means a lower monthly payment. An ARM may be a good match for you when you only expect to spend a few years in your home, or if you want to purchase a larger home than you could otherwise buy without this option.
What types of ARM products are there?
HomeLoanCenter.com offers two popular ARM products: Hybrid and Interest-Only.
Apply for an Adjustable Rate Mortgage
.
Hybrid ARMs have an initial fixed rate period, usually three or
five years. When that period ends, the loan converts to an adjustable rate,
typically changing either every six months or yearly.
.
Interest-only ARMs feature a low initial loan payment that gets
applied to the interest portion of your home loan, freeing up the money that
would typically go toward paying off the principal.
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