Adjustable Mortgage Rates

What is an Adjustable Rate Mortgage?

An Adjustable-rate mortgage is often referred to as an ARM. The adjustable rate mortgage feature an interest rate that undergoes scheduled adjustments, usually annually. The rate fluctuates based on economic conditions, with the potential for increases or decreases. ARMs often start with a low introductory rate, leading to more budget-friendly monthly mortgage payments in the initial period.

Who Benefits from an ARM Mortgage?

This variable rate loan type, with its interest rate adjusting after the initial five to ten years, appeals to individuals intending to sell their homes and relocate before the rate potentially rises to higher levels.

An adjustable-rate mortgage (ARM) is a housing loan featuring an interest rate that may vary periodically, contingent on the performance of a designated benchmark. ARMs are alternatively referred to as variable rate or floating mortgages. Typically, these ARM loans have caps that impose restrictions on the annual or overall increases in interest rates and/or payments. Opting for an ARM can be a prudent financial decision for homebuyers intending to retain the loan for a limited duration and can manage potential increases in their interest rates.

You will enjoy lower interest rates during the initial phase of the mortgage.
With fixed-rate mortgages, you’re committed to the same interest rate throughout the loan term, typically 15 or 30 years. However, with an adjustable-rate mortgage (ARM), you begin with a notably low interest rate during the fixed period.

The fixed period can span the initial three, five, seven, or even ten years of your home loan. During this time, you’re usually charged a lower interest rate compared to a fixed-rate mortgage, leading to savings, at least temporarily.

Your adjusted interest rates might potentially decrease.
After the fixed period, you enter the adjustment period, lasting for the remainder of the loan term. Here, your interest rate changes at predefined intervals, whether it’s every six months or annually.

Your new ARM mortgage rate is influenced by market conditions a low-interest environment could result in a favorable rate. However, if interest rates rise, your new rate may increase accordingly. Nonetheless, due to adjustment caps, your rate won’t surpass a certain percentage or rise by more than a specific amount at each adjustment.

As adjustments align with market trends, you could end up with a lower interest rate than your initial one, leading to ongoing savings as you repay the loan.

Is the Home Equity Line Considered an Adjustable Rate Loan?

Yes, the HELOC features a variable interest rate which can adjust periodically, so it is considered an adjustable rate mortgage. Compare banks and lenders for the best HELOC rates.

Learn More About the Pros and Cons of Adjustable Rate Mortgages

Are you afraid that you might have missed out on the era of low interest rates? They’re still historically low, and the time is now to remodel your kitchen, consolidate high-interest debts, or finally fund that dream vacation for your family. Hurry before it’s too late, and rates return to normal!

Adjustable Mortgage Rates remain fixed for a specific period of time and then begin to adjust periodically. This can be a great option for borrowers who feel that interest rates may decrease or that are planning to live in their home for less than five years.

We can help you decide which loan is the right one for your specific situation.

Get a no-obligation ARM quote today!

Home Equity Mart is a national leader for finding both fixed and adjustable mortgage rates. HEM is dedicated to making sure that your lending experience is as timely and enjoyable as possible. Research our website to learn everything you need to know about mortgage terms. Let us help you realize your housing dreams now, and be on the way to financial freedom!