Adjustable Rate Mortgages (ARM)

Adjustable Products are mortgage loans in which the interest rate and payment amount fluctuate during the life of the loan. The interest rate and payment may adjust every six months. Adjustable programs are fixed for a certain period, most commonly 1, 2 or 3 years.

Every program has its own safeguards built into the mortgage. The most common safeguard discloses that the interest rate can never go up or down by more than 1.5% every six months, and the interest rate will be capped at a pre-disclosed rate.

The interest rate for adjustable rate mortgages are determined by the Index. The Index is the average of interbank-offered rates for six month US dollar denominated deposits in the London market (LIBOR), as published in The Wall Street Journal Six Month LIBOR Rate.

Benefits of Adjustable Rate Mortgages:

AN ADJUSTABLE RATE MORTGAGE WILL HAVE LOWER INTEREST RATES THAN A FIXED PROGRAM. The rate will fluctuate, but when the prime rate is low, your interest rate will decrease also.

Who is this program right for?

Adjustable Rate Mortgages (ARM) are designed for specific situations and borrowers. These mortgages are intended to help borrowers obtain lower rates while their current situation is unstable or undetermined. Home owners that intend to sell or move will take advantage of an adjustable mortgage, since they will not need the loan for the full term. For borrowers that have sub-par credit, they can obtain an adjustable rate mortgage and take advantage of the fixed portion of the loan to help their current situation, and then refinance when their credit becomes better after a few years.