Adjustable-Rate Mortgages
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What is an Adjustable Rate Mortgage (ARM)?
An Adjustable Rate Mortgage (ARM) is a home loan with an interest rate that changes over time based on a predetermined schedule. Unlike a fixed-rate mortgage, which has a stable interest rate for the entire term, an ARM starts with a fixed rate for an initial period, followed by periodic adjustments tied to a specific financial index.
How Does an ARM Work?
Initial Fixed-Rate Period – The interest rate remains the same for a set time (e.g., 1, 3, 5, or more years).
Adjustment Period – After the fixed period, the rate adjusts at regular intervals (e.g., annually).
Rate Changes Based on Index – Adjustments are based on a benchmark like the LIBOR, Treasury Index, or SOFR.
Pros & Cons of an ARM:
Lower Initial Rates – ARMs typically start with lower interest rates than fixed-rate mortgages.
Great for Short-Term Homeowners – Ideal if you plan to sell or refinance before the rate adjusts.
Rates Can Increase – Monthly payments may rise significantly after the fixed period.
Uncertainty – Long-term costs depend on future interest rate changes.
An ARM can be a great choice for the right borrower, but it’s important to understand how rate adjustments may affect your payments. Let’s review your options and find the best mortgage for your financial goals!
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Tiffinie Larkins
Mortgage Broker
License# 2169349
Brokerage License # 1862092
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