Скачать или смотреть What's an Adjustable Mortgage?

An Adjustable-Rate Mortgage (ARM) is a type of home loan where the interest rate can change over time, usually in response to changes in a financial index (like the 1-Year Treasury rate or SOFR).

⸻

🏠 Key Features of an ARM:

1. Introductory Fixed Rate Period
• You get a low fixed interest rate for a set number of years (commonly 3, 5, 7, or 10).
• Example: A 5/1 ARM means your rate is fixed for the first 5 years, then adjusts once per year afterward.

2. Adjustment Period
• After the fixed period, the interest rate adjusts periodically (usually annually).
• The new rate is based on:
• A benchmark index (e.g., SOFR or LIBOR)
• Plus a margin (set by the lender)

3. Rate Caps
• Initial cap: Limits how much the rate can go up at the first adjustment.
• Periodic cap: Limits increases at each adjustment.
• Lifetime cap: Maximum the rate can rise over the life of the loan.

⸻

📊 Example: 5/1 ARM
• First 5 years: Fixed at 4.25%
• After year 5: Adjusts annually
• Let’s say the cap is 2/2/5 (initial/periodic/lifetime)
• Year 6 rate could jump to 6.25% max
• Later years could go up 2% per year, but never more than 5% above the original rate

⸻

✅ Pros of an ARM:
• Lower initial rate = lower monthly payments early on
• Good if you plan to move or refinance before the adjustment kicks in
• May qualify you for more home upfront

⚠️ Cons of an ARM:
• Rates can rise—your monthly payment may go up significantly
• Less predictable than a fixed-rate mortgage
• Riskier in a rising interest rate environment

⸻

💡 When Is an ARM a Good Choice?
• You’re only staying in the home for a few years
• You expect interest rates to stay the same or drop
• You want lower upfront payments and can handle possible increases later
House Keys is brought to you by

Mountain Retreat Realty Experts

https://mtnretreatrealty.com