to move or refinance in a few years?
borrowers in obtaining a larger loan amount This is possible because qualifications
are at the lower interest rate.
money in the early years Lower initial interest rate than a traditional fixed-rate
- Have a
variety of adjustment periods
for people who:
extra borrowing power
to save money in the first few years
to move or refinance in a few years
purchasing or refinancing at a time when interest rates are comparatively high
Mortgages (also called ARMs) feature an interest rate that periodically
adjusts with changing market rates. ARMs are available in government, conforming
and jumbo loan amounts. The ARM allows you to take advantage of lower interest
rates in a falling rate environment, and you'll benefit from lower monthly payments.
The initial interest rate on an ARM is usually lower than the lifetime interest
rate on a fixed-rate mortgage (FRM). ARM interest rates and the degree to which
they fluctuate at the end of every adjustment period, are determined by:
Published economic indices such as U.S. Treasury Securities or London Inter-Bank
Offered Rate (LIBOR) that are used to direct the adjustment.
A fixed percentage (usually two to three percent) that is added to
the index at each adjustment period
Cap: Typically the maximum amount your rate can increase or decrease
per adjustment period (2%) and over the life of the loan (6%). This protects you
in case of volatile market swings.