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Get a Adjustable Rate Mortgage

An adjustable rate mortgage (ARM) is a type of mortgage loan where the interest rate can fluctuate over time based on changes in a benchmark interest rate, such as the London Interbank Offered Rate (LIBOR) or the Treasury Index.

What is a Adjustable Rate Mortgage?

An adjustable rate mortgage (ARM) is a type of mortgage loan where the interest rate can fluctuate over time based on changes in a benchmark interest rate, such as the London Interbank Offered Rate (LIBOR) or the Treasury Index. Unlike a fixed-rate mortgage, where the interest rate remains the same for the life of the loan, an ARM's interest rate can change periodically, which can result in a change in your monthly mortgage payments.


An ARM typically has an initial fixed-rate period, during which the interest rate is fixed for a certain period of time, usually between 3 to 10 years. After the initial fixed-rate period ends, the interest rate can adjust up or down based on the benchmark interest rate and other factors, such as the margin (which is a percentage added to the benchmark interest rate). The frequency of the interest rate adjustments, the maximum amount that the interest rate can change at each adjustment, and the maximum rate increase over the life of the loan are all determined by the terms of the loan.


One of the benefits of an ARM is that the initial interest rate is typically lower than that of a fixed-rate mortgage, which can make the monthly payments more affordable during the initial fixed-rate period. However, there is a risk that the interest rate can increase over time, which can result in higher monthly mortgage payments.


ARMs can be a good option for borrowers who plan to sell their home or refinance before the initial fixed-rate period ends, or who anticipate a decrease in interest rates in the future. However, it's important to carefully consider the potential risks and benefits of an ARM and to consult with a financial advisor or mortgage professional before making a decision.

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FAQs

Got a question? We’re here to help.

  • What is an ARM?

    An ARM is a type of mortgage loan where the interest rate can fluctuate over time based on changes in a benchmark interest rate, such as the London Interbank Offered Rate (LIBOR) or the Treasury Index.

  • How does an ARM work?

    An ARM typically has an initial fixed-rate period, during which the interest rate is fixed for a certain period of time, usually between 3 to 10 years. After the initial fixed-rate period ends, the interest rate can adjust up or down based on the benchmark interest rate and other factors.

  • What is the benefit of an ARM?

    One of the benefits of an ARM is that the initial interest rate is typically lower than that of a fixed-rate mortgage, which can make the monthly payments more affordable during the initial fixed-rate period.

  • What is the risk of an ARM?

    The risk of an ARM is that the interest rate can increase over time, which can result in higher monthly mortgage payments.

  • How often can the ARM interest rate change?

    The frequency of the interest rate adjustments is determined by the terms of the loan, but it is typically once per year.

  • How is the ARM interest rate determined?

    The interest rate on an ARM is based on a benchmark interest rate, such as the London Interbank Offered Rate (LIBOR) or the Treasury Index, plus a margin, which is a percentage added to the benchmark interest rate.

  • Can I refinance an ARM?

    Yes, you can refinance an ARM into another ARM or a fixed-rate mortgage, depending on your financial situation and goals.

  • What are the qualifications for an ARM?

    Qualifications for an ARM are similar to those for a fixed-rate mortgage, including credit score, income, and debt-to-income ratio.

  • Should I get an ARM or a fixed-rate mortgage?

    The decision to get an ARM or a fixed-rate mortgage depends on your financial situation and goals. It's essential to carefully consider each option's potential risks and benefits and consult with a financial advisor or mortgage professional before making a decision.