Most buyers default to a 30-year fixed mortgage without considering what else is out there. If you’re not planning to stay in a home for decades, or you want to keep your early payments lower, an Adjustable-Rate Mortgage (ARM) is worth a closer look.
How an ARM works
An ARM starts with a fixed rate for an initial period, typically 5 or 7 years, at a level that’s usually lower than a comparable 30-year fixed mortgage. After that window, the rate adjusts on a set schedule.
Worth noting: The rate difference can add up to hundreds of dollars in savins every month during those first few years.
Adjustments aren’t open-ended. Rate caps are built into every ARM to limit how much the rate can change at each interval and over the life of the loan.
Who it works for
An ARM tends to make the most sense in these situations:
ARM options available for you:
A fixed rate makes sense for a lot of buyers. But if your timeline is shorter or your priority is keeping early payments low, an ARM may serve you better. Let’s see what your number looks like and find the option that fits your timeline and goals.
An Adjustable-Rate Mortgage (ARM) has an interest rate that can change after an initial fixed-rate period. Your monthly payment may increase or decrease during the life of the loan. Buydowns are temporary and apply to the early years of the loan only. Purchase transactions only. Subject to credit approval.
