Overview of an Adjustable Rate Mortgage (ARM)

If you don’t want to be tied down, look into an adjustable rate mortgage, also known as an ARM. These mortgages have interest rates that can fluctuate in response to changes in the Treasury Bill rate or prime rate. If you select an ARM, you’ll start out with a rate that’s lower than that for a fixed rate mortgage for a specified amount of time. In exchange for this short term low rate, however, you will be taking a risk that the rate will rise in the future. The more risk you take on by allowing for additional rate adjustments over time, the lower your rate will be when you start. And you’re always protected by a “ceiling,” or a maximum rate, so you’ll never face anything unexpected.

The Benefits of an ARM

As with an interest-only loan, you can often get more house for your money with an ARM. As you’ll start out with the lowest interest rate available, you can save money for that period of time before refinancing. Additionally, if you plan on moving within a short period of time, this can be the ideal option because you will reduce your risk. An ARM may not be right for someone who is buying a house for the long term or who doesn’t like to take risks.

If you think an ARM is right for you, fill out our easy online application today and one of our experienced, knowledgeable staff members will be in touch to answer your questions and help you evaluate your options.