Why Consider an ARM?
- Lower Payments: Enjoy lower monthly payments before the interest rate changes. This may allow you to make extra payments towards your principal.
- Flexibility: Ideal if you plan to move or refinance within a few years.
- Smart Strategy: Most homeowners refinance every 3-5 years, making an ARM a cost-effective choice for short-term plans.
- Real Estate Loan Checklist
What is an ARM?
An Adjustable-Rate Mortgage (ARM) starts with a fixed interest rate for a set period, then adjusts based on an index, like the Weekly 1-year Constant Maturity Treasury (CMT) and the margin. Your margin is specified in your loan documentation. Your ARM rate will never fall below the margin. For example, a 7/1 ARM offers a fixed rate for the first seven years (the "7" in 7/1). After that, the rate adjusts every year (the "1") based on the loan's index plus the margin.
Why does the rate change? The interest rate fluctuates because it follows a specific index. But don’t worry – your loan comes with a rate cap that limits how much your interest rate and payments can change, protecting you from sharp increases.
ARM vs. Fixed-Rate Mortgage
- ARM: Initial lower rate with adjustments over time. Best for short-term homeowners.
- Fixed-Rate: Stable, unchanging interest rate throughout the life of the loan. Ideal for long-term stability.
Interest Rates As Low As
Explore Our ARM Options:
3/1 ARM features:
- Rate Structure: Fixed for 3 years, variable for the next 27 years (adjusts annually).
- Loan Amounts: Up to $2,000,000.
- Rate Caps:
- Max 2% change after the initial fixed period.
- Max 2% change per year after each subsequent adjustment.
- Max interest rate: Initial Rate + 6%.
5/1 ARM features:
- Rate Structure: Fixed for 5 years, variable for the next 25 years (adjusts annually).
- Loan Amounts: Up to $2,000,000.
- Rate Caps:
- Max 2% change after the initial fixed period.
- Max 2% change per year after each subsequent adjustment.
- Max interest rate: Initial Rate + 5%.
5/5 ARM features:
- Rate Structure: Fixed for 5 years, then adjust every 5 years after that.
- Loan Amounts: Up to $2,000,000.
- Rate Caps:
- Max 2% change after the initial fixed period.
- Max 2% change every 5 years.
- Max interest rate: Initial Rate + 5%.
7/1 ARM features:
- Rate Structure: Fixed for 7 years, variable for the next 23 years (adjusts annually).
- Loan Amounts: Up to $2,000,000.
- Rate Caps:
- Max 2% change after the initial fixed period.
- Max 2% change per year after each subsequent adjustment.
- Max interest rate: Initial Rate + 5%.
15/15 ARM Features:
- Rate Structure: Fixed for 15 years. Adjust only once, at the end of the 15th year.
- Loan Amounts: Up to $2,000,000.
- Rate Caps:
- Max 5% change after the initial fixed period.
Ready to Choose? Get Started Today!
Now that you understand the differences between an ARM and a fixed-rate mortgage, you’re better equipped to make the right choice for your situation.
Have Questions? Fill out the form below:
All loans are subject to credit approval and are subject to the Credit Union policies and procedures.
NMLS ID #649058. Mortgages available in all 50 states.
APR = Annual percentage Rate.
ARM = Adjustable-Rate Mortgage.
* 3/1 adjustable rate mortgage payment example: This is a fixed rate loan for the first 3 years then the rate adjusts every year thereafter with a maturity in 30 years. For a $400,000 loan with a start rate of 6.125% Rate, 6.589% APR (Annual Percentage Rate), for the first 36 months, your estimated fixed payment would be $2,430.44. Your first adjustment will occur at the 36th month. Your rate will be no more than 8.125% with an estimated fixed payment of $2,934.18 for 12 months. Your second adjustment will occur at the 48th month. Your rate will be no more than 10.125% with an estimated fixed payment of $3,462.82. Rates increase no more than 6% above the initial start rate over the life of the loan and a maximum rate of 12.125%, with an estimated maximum payment of $4,009.85. Index rate for the One-Year Treasury Constant Maturity is 4.65%. Taxes and insurance premiums are not included in the payment and that the actual payment obligation may be greater.
* 5/1 adjustable rate mortgage payment example: This is a fixed rate loan for the first 5 years then the rate adjusts every year thereafter with a maturity in 30 years. For a $400,000 loan with a start rate of 6.125% Rate, 6.545% APR (Annual Percentage Rate), for the first 60 months, your estimated fixed payment would be $2,430.44. Your first adjustment will occur at the 61st month. Your rate will be no more than 8.125% with an estimated fixed payment of $2,908.17 for 12 months. Your second adjustment will occur at the 73rd month. Your rate will be no more than 10.13% with an estimated fixed payment of $3,408.14. Rates increase no more than 5% above the initial start rate over the life of the loan and a maximum rate of 11.125%, with an estimated maximum payment of $3,663.27. Index rate for the One-Year Treasury Constant Maturity is 4.65%. Taxes and insurance premiums are not included in the payment and that the actual payment obligation may be greater.
5/5 adjustable rate mortgage payment example for a purchase: This is a fixed rate loan for the first 5 years then the rate adjusts and is fixed for another 5 years. Adjustments only occur every 5 years with a maturity in 30 years. For a $400,000 loan with a start rate of 5.75% Rate, 6.884% APR (Annual Percentage Rate), for the first 60 months, your estimated fixed payment would be $2,334.29. Your first adjustment will occur at the 61st month. Your rate will be no more than 7.75% with an estimated fixed payment of $2,802.64 for 60 months. Your second adjustment will occur at the 121st month. Your rate will be no more than 9.75% with an estimated fixed payment of $3,238.14. Rates increase no more than 5% above the initial start rate over the life of the loan and a maximum rate of 9.75%, with an estimated maximum payment of $3,426.39. Index rate for the Five-Year Treasury Constant Maturity is 3.65%. Taxes and insurance premiums are not included in the payment and that the actual payment obligation may be greater. Rates are subject to change without prior notice.
7/1 adjustable rate mortgage payment example for a purchase: This is a fixed rate loan for the first 7 years then the rate adjusts every year thereafter with a maturity in 30 years. For a $400,000 loan, with a 5.99% Rate, 6.358% APR, for the first 84 months, your estimated payment would be $2,395.63. Your first adjustment will occur at the 85th month. Your rate will be no more than 7.99% with an estimated fixed payment of $2,842.16. Future adjustments of no more than 2% adjust every 12 months. Rates increase no more than 5% above the initial start rate over the life of the loan and a maximum rate of 10.99%, with an estimated maximum payment of $3,544.99. Index rate for the One-Year Treasury Constant Maturity is 4.35%. Taxes and insurance premiums are not included in the payment and that the actual payment obligation may be greater. Rates are subject to change without prior notice.
For a refinance the APR will be 6.301% for the first 84 months, your estimated payment would be $2,395.63.
15/15 Adjustable Rate Mortgage: This is a fixed-rate loan for the first 15 years (180 months). After that, the rate adjusts once and is then fixed for the remaining 15 years, with a total loan maturity of 30 years. For a $400,000 loan with a start rate of 5.75%, 5.894% APR (Annual Percentage Rate): For the first 180 months, your estimated fixed payment would be $2,334.29. Your first adjustment will occur at the 181st month. Your rate will be no more than 10.75% (5% lifetime cap above the initial start rate), with an estimated maximum fixed payment of $3,151.00 for the remaining 180 months. Rates may increase no more than 5% above the initial start rate over the life of the loan, with a maximum rate of 10.75% and an estimated maximum payment of $3,151.00. The current index rate for the Five-Year Treasury Constant Maturity is 3.65%. Taxes and insurance premiums are not included in the payment, and the actual payment obligation may be greater. Rates are subject to change without prior notice.