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When is an Adjustable Rate Mortgage right for you?


An Adjustable Rate Mortgage (ARM) is a type of home loan that starts with a fixed rate and adjusts to a variable rate after a set amount of time. The change in rates usually happens anywhere between 6 months and 10 years after the loan period begins. So how could an ARM be beneficial to you?

These types of loans may be advantageous if you plan to move in the near future. For example, if you have a goal to relocate in five years, then perhaps you would consider a 5/1 ARM plan. A 5/1 ARM will be fixed for the first five years of the loan and then become variable starting in the sixth year.

If you are seeking the lowest monthly payments right now, or if you know you’ll be paying off the loan in just a few years, an ARM might also suit you. Whatever your situation, First Tech has ARM options that can fit your needs.

Adjustable Rate Mortgages at First Tech come with a cap, so that your monthly mortgage payment doesn’t increase too abruptly. Lenders who have caps can apply them each year or over the life of the loan. A cap may apply to points on the interest rate of the loan or on the dollar amount of your monthly payment. First Tech ARMs are designed for flexibility and lower risk.

The ARM interest rate is based on a combination of factors including an index rate that the lender uses and an additional calculation called the margin. If the index is 2% and margin is 3%, your interest rate on the loan would be 5%. Though the margin will not change, the index rate can change over time which in turn can affect your interest rates as it adjusts throughout your loan term. 

Here are a few more things to consider with Adjustable Rate Mortgages:

  • You’ll likely have lower loan payments in the initial term compared to a fixed rate mortgage
  • You may be able to qualify for a larger loan amount
  • More attractive for borrowers with good credit history
  • Used more often when borrowers expect to sell their home in 10 years or less

Whatever your plans and goals, meet with an experienced First Tech mortgage loan officer first to discuss your future. They can help you explore all of your options and find the loan that feels like home.

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