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Knowledge Base Article

Adjustable Rate Mortgage Loan (ARM)

What is an adjustable rate mortgage (ARM) loan?

It is a mortgage loan whose interest rate may vary after an initial 3, 5, 7 or 10 year fixed term. Qualifying properties include primary residences, second/vacation homes or rental properties.

Some Features of this Product:

  • Variable interest rate after an initial fixed term
  • For 5/1, 7/1, & 10/1 ARM, 5% lifetime cap over the original rate (Not to exceed 5% over the original rate)
  • For 3/1 ARM, 6% lifetime cap over the original rate (Not to exceed 6% over the original rate)
  • Interest rate increases and decreases are limited to a 2% per year cap after the first change (Not to increase more than 5% on the first change, then limited to 2%)
  • No prepayment penalty
  • No negative amortization
  • Competitive Fees

5/1 Arm is our program that is fixed for 5 years at the rate determined by the CU, then at the end of the 60 month payment the rate becomes adjustable and can adjust every 12 months. The 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 Mortgage Loans.