Benefits of an Adjustable-Rate Loan (ARM)
An Adjustable-Rate loan or ARM is a mortgage loan with an interest rate that changes throughout the loan. Initially you may be locked into a lower fixed interest rate. After the specified length of time, the interest rate and payment will adjust to reflect the market conditions, potentially adjusting to a higher or lower interest rate. ARMs are ideal for those who are looking to stretch their monthly budgets further, especially during a time when interest rates are going up.
Types of ARMs
Beacon Credit Union offers several mortgage loans that fit a wide range of needs, including four Adjustable-Rate Mortgages loans.
- 3/1 ARM
- 5/1 ARM
- 7/1 ARM
- 10/1 ARM
The first number in each ARM loan refers to the number of years that the initial rate is locked in for. For example, if you choose a 3/1 ARM, your initial fixed rate is locked in for three years. The second number in each ARM is the frequency that the rate can adjust. The 1 in the 3/1 ARM example shows the rate can adjust with the index rate every year thereafter.
Top Three Reasons to get an ARM
- Lower Fixed Initial Rates. ARM’s typically have a lower introductory period, often lower than the going rate of a 30-year fixed mortgage. Not only do you lock in a lower interest rate, but this also means a lower monthly payment.
Your rates will be adjusted once the fixed-rate period ends. The new rate will reflect market conditions and may be higher or lower than your existing ARM rate. If the rate goes up, there are built in caps that act as a ceiling, so your rate and payment will never go higher than the specified amount. - Build Equity in your Home. With lower interest rates, a higher percentage of your monthly payment will go towards the principal of your loan, allowing you to pay down your principal faster and build equity in your home.
- Short-term Mortgage. ARMs are ideal for those who are living in their home for a short amount of time. This could include “starter homes,” flipping houses, or even having to relocate for work. With ARM loans you can lock in a lower rate and term and before your loan rate changes you could be moving into your next home.
Have questions? Our knowledgable Mortgage Experts can assist you. MORTGAGE EXPERTS
*Adjustable Rate Mortgages are variable, and your Annual Percentage Rate (APR) may increase or decrease after the original fixed-rate period. The First Adjusted Payments displayed are based on the current Constant Maturity Treasury (CMT) index, plus the margin (fully indexed rate) as of the stated effective date rounded to nearest 1/8th of one percent. All loans subject to credit approval.
Rates are subject to change. Rates are based on creditworthiness, loan-to-value (LTV), occupancy and loan purpose, so your rate and terms may differ. All loans subject to credit approval. Rates quoted require a loan origination fee of 1.00%, which may be waived for a 0.25% increase in the interest rate. Many of these programs carry discount points, which may impact your rate.
