Adjustable Rate Mortgages (ARMs)

 

Adjustable rate mortgages have interest rates that may vary up or down at fixed intervals, and often offer a low beginning interest rate that will go up after a certain time.house3

  • Interest rates and payment amounts may fluctuate
  • Transfers a portion of the risk associated with a changing economy to buyers
  • In exchange for sharing the risk, ARMs offer  substantially lower initial interest rates than fixed rate mortgages
  • Lower initial interest rates may help applicants qualify more easily; qualifying factors may vary

For example, some loans could be formatted as 5/1, 7/1, or 10/1 ARMS.  In this scenario, the payment will be fixed for the first 5-, 7-, or 10-years and then adjusts every 12 months.