What is an adjustable rate mortgage (ARM) loan?
An adjustable rate mortgage loan is a mortgage loan whose interest rate may vary after an initial 5, 7 or 10 year fixed term. For the remainder of the home loan, the interest rate would adjust annually, depending on the market. Qualifying properties include primary residences, second/vacation homes or rental properties.
Some Features of this Product:
- Variable interest rate after an initial fixed term
- 7/1, & 10/1 ARM, 5% lifetime cap over the original rate (Not to exceed 5% over the original rate)
- 5/1 ARM, 6% lifetime cap over the original rate (Not to exceed 6% over the original rate)
- After the initial fixed term, the Interest rate cannot increase more than 5% for 7/1 and 10/1 and 2% for 5/1 over the initial rate on the first change. Interest rate increases and decreases thereafter are limited to a 2% per year.
- No prepayment penalty
- No negative amortization
- Competitive Fees
A 2.75% margin is used for the ARM products. It is the rate spread that is added to the FNMA mandatory (index) rate to determine the rate to be used for the next 12 months.
More information on Home Loans.
