What is an Adjustable Rate Mortgage (ARM)?With an ARM, the interest rate you pay is adjusted periodically to keep it in line with the changing market rates. This means when interest rates go up, your monthly mortgage payment may also increase. On the other hand, when interest rates go down, your monthly mortgage payments may decrease.
You may want to consider an ARM if:
- Your income will rise enough in the coming years to comfortably handle any increase in payments
- You plan to move prior to any interest rate adjustments to your ARM
- You need a lower initial rate to afford the home you want
- Adjust annually after the initial period - five, seven, or 10 years
- Have a yearly cap of 2% on interest rate increases and a lifetime cap of 6%
- Are always tied to a financial index, the one-year LIBOR
- Always have a margin that is added to the index to determine the adjusted interest rate. Our margin is 2.75%
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