An ARM provides an opportunity to get into a new home at a lower rate, with the rate fixed for an initial period of 3, 5, 7 or 10 years. After this period, the rate can increase annually.
What are the benefits of an ARM?
Take advantage of a lower, interest rate that will not change for the initial fixed period.
Choose from a 3/1, 5/1, 7/1 or 10/1 ARM. Depending on your choice, the rate will remain unchanged for 3, 5, 7 or 10 years and can change annually afterward.
After the fixed period, rate (tied to a market index) has potential to decrease.
If interest rates drop, so will your monthly payment.
After the fixed period, rate can only increase up to 2% annually or 5% for the life of the loan.
You have the option to refinance at the end of the fixed rate period.
Is an ARM right for you?
Ideal if you think future interest rates could decrease.
You intend to use the savings from your lower rate and payment to pay down your loan more quickly.
You plan to own your home for a short time or expect a significant increase in future earnings.
Subject to credit approval. Property insurance required. All funds will be verified.
Example of how an ARM is calculated: On a $230,000, 5/1 ARM amortized over 30 years with an initial interest rate of 3.250% with an annual percentage rate of 3.927%, after fixed-period of 5 years the rate may increase annually; individual adjustments are capped at 2% first, 2% subsequent and rate can never increase by more than the lifetime cap of 5%. Finance charges include $850 origination fee, $6.70 flood certification fee and $72 tax service fee. Additional closing costs apply. A payment example would be as follows based on a fully-capped interest rate of the loan: Years 1-5 at 3.250% rate with a payment of $1,000.97, Year 6 at 5.250% rate with a payment of $1,230.89, Year 7 at 7.250% rate with a payment of $1,476.90 and Years 8-30 at 8.250% rate with a payment of $1,603.92. The monthly payment may change when the interest rate on an adjustable rate mortgage is reset. After the initial fixed-rate period, your interest rate can increase annually according to the market index. Current index (LIBOR 12 month) as of Dec 6, 2019 is 1.923%. The current index plus Margin rounded to the nearest 0.125 is 4.125%. Any change may significantly impact your monthly payment. Rate payment example does not include costs of insurance and taxes; therefore, the actual payment obligation may be higher.
