What is an Adjustable Rate Mortgage (ARM) loan?
Adjustable rate mortgages feature lower introductory interest rates and payments and are fixed for the initial term of 5, 7 or 10 years of the loan. After the initial fixed term, the interest rate adjusts every year for the remaining life of the loan. Typically the payments start lower than fixed-rate mortgages. Each year after the initial term of the loan ends, payments will adjust based on current market conditions. Interest rates could go up or they could go down. There may also be limits to how much the rate can rise during the term of your loan.
Types of ARMs
- 5/1 ARM rates are fixed for the first five (5) years and then the rate can adjust every one (1) year thereafter
- 7/1 ARM rates are fixed for the first seven (7) years and then the rate can adjust every one (1) year thereafter
- 10/1 ARM rates are fixed for the first ten (10) years and then the rate can adjust every one (1) year thereafter
Is an ARM refinance right for me?
An ARM may be a good fit for someone who would like lower payments for the first few years of a loan. For example, if you are only planning on staying in a home for just a few years an ARM might be right for you. ARMs can also benefit those who have a limited income now but know they will be earning more down the road. Perhaps you are starting a new job and make a certain amount now, but you will be earning more soon. Arms can also be beneficial if you plan on refinancing before your fixed rate period is up. Whatever your case may be, Carrington can help you decide if an ARM is right for you.
How do I get an ARM loan?
Once you have decided an ARM will fit you best, contact us and speak with a Carrington loan officer. We will be happy to walk you through the application process. Call (888) 267-0584 or click here to start now.