Adjustable-Rate Mortgage (ARM) Reference Guide

What is an Adjustable-Rate Mortgage (ARM) loan?

Adjustable-rate mortgages offer lower introductory interest rates and payments. After the initial fixed term, the interest rate adjusts periodically for the remainder of the loan term. Typically, payments for adjustable-rate mortgages start lower than those for fixed-rate mortgages. After the initial fixed term of the loan ends, payments will adjust based on current market conditions.

If you're exploring mortgage options, an ARM can be a smart financial tool, especially if you plan to move, refinance or pay off your loan within a few years.

Types of ARMs

• 5/6 ARM, 7/6 ARM or 10/6 ARM: These refer to hybrid ARM loans with a fixed rate for the first 5, 7 or 10 years, respectively, followed by potential adjustments every 6 months.

Here’s why an ARM might be a great fit for you:

• Lower initial rates: ARMs typically offer lower interest rates during the initial fixed period compared to traditional fixed-rate mortgages.
• Short-term savings: If you don’t plan on staying in your loan long-term, an ARM can help you maximize savings before the rate adjusts. Many borrowers use this strategy to build equity more quickly or invest the savings elsewhere.
• Rate flexibility: After the fixed period, your rate adjusts based on market conditions. If interest rates stay low, your payments could remain affordable.
• Built-in protection: ARMs come with rate caps that limit how much your interest rate can increase at each adjustment and throughout the life of the loan. This helps protect you from sudden payment spikes.

How do I get an ARM loan?

Once you have decided an ARM will suit you best, our lending experts will help guide you towards your homeownership goals. Contact us today to get started!