Adjustable rate mortgage loans are mortgages with an interest rate that may vary over the term of the loan. This is usually in response to changes in the prime rate or Treasury Bill rate. The purpose of the interest rate adjustment is primarily to bring the interest rate on the mortgage in line with market rates. Mortgage holders are protected by a ceiling, or maximum interest rate, which can be reset annually. ARMs typically begin with more attractive rates than fixed rate mortgages — compensating the borrower for the risk of future interest rate fluctuations.
Choosing an ARM is a good idea when interest rates are going down and you intend to keep your home for a period less than the term you choose. The adjustable-rate mortgage offers the benefits of lower initial monthly payments than fixed-rate mortgages for the first pre-determined term—giving the opportunity to qualify for larger loan amounts, initial lower payments, and short-term savings.
If you chose a mortgage with a 5/1 ARM your payments would be at a fixed interest rate for the first 5 years. After the first 5 years have elapsed, your rate could swing higher or lower once per each subsequent year, depending upon the current market rates at the time the adjustment takes place. Keep in mind that you can refinance into a fixed-rate mortgage at any time that you desire but you will still have to be qualify for the new loan terms.
Division Mortgage Group offers adjustable rate loans with terms of: 3/1, 5/1, 7/1, & 10/1 ARMS.
For more information, contact us at 406-294-7207 or firstname.lastname@example.org
or visit us at our downtown Billings location at 1320 Division Street, Billings, MT 59101.
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These materials are not from HUD or FHA and were not approved by HUD or a government agency.