Adjustable-Rate Mortgages (ARMs)

If you’re looking for a mortgage that offers lower initial rates and flexibility in payments, an Adjustable-Rate Mortgage (ARM) could be the perfect solution. ARMs provide an opportunity to enjoy lower initial payments, which can be especially advantageous if you’re planning to sell or refinance within a few years.

An ARM offers a dynamic option for homeowners who seek both lower upfront costs and the flexibility of adjusting payments. Here’s why more buyers are choosing ARMs:

• Lower Initial Rates: ARMs start with a lower interest rate than fixed-rate loans, giving you immediate savings on your monthly payments.
• Flexible Down Payments: With down payments as low as 5%, ARMs are more accessible and help reduce the upfront cost of homeownership.
• Lower Payments Early On: During the fixed-rate period, your payments remain stable and lower than a fixed-rate mortgage, giving you more room in your budget.
• Potential for Decreased Payments: If market interest rates drop, your payments could decrease when the adjustable period begins.

• Lower Initial Payments: Enjoy lower payments at the start of your loan, making it easier to afford a higher-value home.
• Flexible Financing Options: ARMs provide a unique opportunity to tailor your loan to your financial situation with the flexibility to refinance as needed.
• Market-Responsive: If interest rates decrease during your loan term, your payments could adjust downward, offering long-term savings.

Here’s what you need to know about qualifying for an ARM:

• Minimum Down Payment: With just 5% down, you can unlock homeownership with a lower upfront cost.
• Credit Score: A credit score of 620 or higher is typically required to secure the best rates.
• Flexible Terms: ARMs are designed to accommodate various credit profiles, making them accessible to a wide range of borrowers.
• Lower Monthly Payments: The initial fixed-rate period ensures that your monthly payments will be lower than those of a traditional mortgage, allowing for more financial flexibility.

An Adjustable-Rate Mortgage consists of an initial fixed-rate period followed by an adjustable period. During the fixed period, your interest rate stays the same, and once the adjustable period kicks in, your rate adjusts based on current market conditions. The rate changes are tied to a specific index (often SOFR), and the lender’s margin is added to it to calculate your new rate. Caps are in place to limit how much your rate can increase, giving you protection from extreme rate hikes.

Pros:

• Competitive Initial Rates: ARMs offer lower starting interest rates, making them an attractive option for short-term buyers.
• Refinancing Potential: The initial fixed period can provide an excellent opportunity to refinance into a more permanent loan before the adjustable period starts.
• Market Flexibility: If interest rates fall, your payments could decrease, saving you money.

Cons:

• Risk of Rate Increases: Your payments may rise when the adjustable period begins if market rates go up.
• Complex Planning: ARMs require a strategic approach, as you’ll need to plan ahead for potential rate increases.
• Uncertainty: If the market fluctuates significantly, your payments could become less predictable, making it more difficult to budget.

ARMs are ideal for:

• Short-Term Homeowners: If you plan to sell or refinance within 5-10 years, an ARM can offer significant savings during the initial fixed-rate period.
• Homebuyers with Plans to Refinance: If you’re looking to refinance in the future, an ARM can help you save in the short term and give you more flexibility down the line.

While Fixed-Rate Mortgages offer predictable payments for the entire term, ARMs are perfect for buyers looking for flexibility. ARMs are especially beneficial for buyers who may not stay in their homes long enough to see the adjustable rates increase.

Ready to explore an ARM? Get started with a free, no-obligation quote and see how an ARM can save you money.

• Instant Quote: Get your rate quickly and without any impact to your credit score.
• Expert Consultation: Speak with one of our specialists to learn more about the ARM options that fit your financial goals.
• Streamlined Process: Our easy application process helps you get started without any hassle.