Often referred to as ARMs, adjustable-rate mortgages were introduced to U.S. homebuyers in the early 1980s. These loans have an interest rate feature that adjusts, or “resets”, at certain intervals during the life of the loan. These adjustments may start as soon as 1 year, or as long as 10 years after your loan closes.
An ARM may be a good choice if you:
- Prefer a slightly lower interest rate during the first years in your new home
- Will increase your household income in the future
- Plan to move within a few years
Generally, ARMs offer lower initial interest rates than fixed-rate loans. This is because you're offered the opportunity to save money by exchanging the security of a fixed rate for a lower rate that may go up when it's time to adjust.
Depending on your loan, your initial ARM payments will have a fixed rate for anywhere from 1 to 10 years. After a specified time period as defined in your loan agreement, your interest rate will be adjusted by adding a pre-determined margin to a financial index like Treasury bills, LIBOR (London InterBank Offered Rate) or COFI (Cost of Funds Index).
Your loan will also have a "cap" which limits how high or low your new interest rate can go. For example, a 7/1 ARM with a 2% cap may offer an initial 5% interest rate. After the first seven years, the loan's rate may adjust to 3%, or as high as 7%.
Pinnacle Mortgage Bankers offers a wide range of ARMs, including:
- FHA -- with lower down payment options starting at 3.5% and flexible qualifying guidelines.
- Jumbo -- up to $2 million in funds for homes in high-cost areas, or for financing a bigger, more luxurious residence.
- Interest-only* -- Keep your initial payments lower for an introductory period of up to 10 years.
Contact us for more details of our balloon mortgages, or apply now via our secure online application.
* Monthly payments will increase after the initial interest-only payment period ends.
