Adjustable-Rate Mortgage
Providing Flexibility for Homeowners
An adjustable-rate mortgage (ARM) is a loan term option with interest rates that can change periodically after the initial fixed-rate period. After this introductory period, monthly payments are susceptible to increases or decreases based on market fluctuations, which can also affect the monthly payment.
Adjustable-Rate Mortgage Highlights
An ARM might be the right option for you if you plan on moving within 7 years since they feature lower introductory interest rates. If interest rates are expected to fall, a homeowner could potentially reduce their monthly payments with the lowered interest rates. Highlights of an adjustable-rate mortgage include:
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Lower initial monthly payments
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Possibility to qualify for higher loan amounts
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Rates and Payments may decrease based on the index rate
What Is an Adjustable-Rate Mortgage?
An adjustable-rate mortgage loan is any home loan where the interest rate can change periodically after its initial fixed-rate period. The increases or decreases in the mortgage rate after the initial fixed-rate period are dictated by fluctuations in the market, so it is hard to tell what your interest rate on the loan will be after the initial period.
Keep in mind, the term “adjustable-rate” describes differences in loan term, not necessarily loan type. You can get a Conventional ARM loan, an FHA ARM loan, VA ARM loan or USDA ARM loan, just like you can with fixed-rate home loans.