Arm - Adjustable Rate Mortgages

Product Descriptions

ARM - Adjustable rate mortgages in Tennessee, Missouri, Indiana, Colorado, Mississippi, Alabama and Florida.

Adjustable rate mortgages (ARMs) are often attractive to borrowers because they usually have lower initial interest rates than fixed rate mortgages. 

After an initial fixed period, the interest rates of ARMs adjust up or down at a certain frequency – such as annually – based on a couple of factors. 

The first is called an index.  Adjustable rate mortgages are ‘pegged’ to some variable financial rate, such as the one year Treasury bill. 

The other factor is a fixed amount called a margin.  This runs anywhere from 2% for the best loans, to 5% and up for loans for loans that have higher risk to the banks. 

The two numbers added together become the new adjusted interest rate, subject to certain limitations called caps.

Adjustable rate mortgages on average tend to be lower than fixed rate mortgages.  However, when circumstances result in the indexes rising, the result can be rates significantly higher than when the loans closed.  This of course means higher payments.

ARMs can be excellent mortgages when people expect to have a mortgage for a certain period of time, such as when one expects to move after a few years due to expected job transfers, changes in family size due to births or children moving out of the home, etc.