Adjustable-Rate Mortgages
An adjustable-rate mortgage (ARM) can benefit a homeowner looking to stretch his monthly budget. If you want to save more money on your mortgage from month-to-month, an ARM may be right for you.
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Get Started Now!Why Choose an Adjustable-Rate Mortgage?
If you plan on living in your home for a short time period — usually seven years or less — an adjustable-rate mortgage may be a perfect fit for you. Adjustable-rate mortgages stay fixed for an initial time period (anywhere from one to seven years) and then convert to a rate that varies with the indexed rate. You may save more money with an ARM if you plan to stay in your home for a few years.
How Does an ARM work?
Adjustable mortgages have interest rates that are based on the fully indexed rate published in the Wall Street Journal. An ARM's interest rate can move up and down, depending on what the index rate is doing. Generally, adjustable-rate mortgages start with low rates--much lower than fixed-rate mortgages, where interest rates remain the same for the home loan's entire life.
What Does 3/1, 5/1 and 5/6 Mean?
The first number represents the initial term of the loan. For example, a 3/1 ARM would be fixed for three years. The second number shows how often the rate can change or adjust after the fixed term of the loan ends. If one as the second number, the rate adjusts annually after the initial term. A six as the second number typically means the rate adjusts every 6 months after the home loan's initial term expires.
For more information on ARM options, check out our Adjustable Rate Mortgage FAQs.
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