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Adjustable Rate Mortgage (ARM)

July 29th, 2022 10:27 AM by Ken Morley

Discussions around the adjustable rate mortgage (ARM) are now  beginning to surface again due to higher fixed rates. Here are a few important features of the ARM to keep in mind. The starting rate, typically lower than a fixed rate, is temporary and will only last for a specified amount of time. For example a 5/1 ARM will have the lower (starting) rate for 5 years and then the rate will adjust annually every year based on a margin plus the index. ARM loans do have caps which limit the amount the rate can adjust each year and then a lifetime cap which is the highest the rate could ever go.  ARMs also have a "floor" or bottom rate which is the lowest the loan will allow. Adjustments in the rate will result in adjustments to your monthly payment. Although thoughts are that rates will come back down in the future, there is no guarantee so this adds an element of risk to an ARM loan. An ARM loan also may work to your advantage if you are only planning to stay in your home short-term before the first adjustments occur. To learn more about ARM loans and whether they will work out well for you simply give us a call at (303) 650-9400 or click on our "Apply Now" button on the home page. Hope this have been helpful! 

Posted by Ken Morley on July 29th, 2022 10:27 AM

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