An adjustable-rate mortgage (ARM), sometimes referred to as a hybrid-ARM, offers an initial interest rate that is lower than most fixed-rate loans. If you’re refinancing to an ARM, this may mean a lower monthly payment than your current loan.
The trade-off is that the interest rate is only fixed for a certain number of years, and not for the life of the loan.
APGFCU offers ARM loan options in several term lengths, including 10/1, 7/1, and 5/1. Each loan has a fixed rate for the first set number of years, and adjusts every year thereafter, according to the 30- or 15-year amortization schedule of your loan. While the rate could adjust down, below the initial rate, it could also adjust up, which could increase your monthly payment.
There is an advantage to a lower rate and payment in the early years of your mortgage, but you should consider what an increase in interest rates—and potentially the monthly payment amount—would mean to your budget down the road.
For many people, an ARM is a good mortgage choice, particularly if your income is likely to increase in the future or if you only plan on being in your home for a pre-determined amount of time.
To learn more about ARM loan options, call 888-LOAN-391 (888-562-6391) to receive a call from an APGFCU Mortgage Consultant.
Membership eligibility applies. Loans are available only on primary and secondary single-family residences or owner-occupied condominiums located in MD, D.C., DE, NJ, PA, NC, SC, FL, and VA. Subject to credit approval. Other restrictions may apply. Not all applicants will qualify.
Variable rate: APR and payment are subject to increase after loan consummation. Rate is fixed for the first 5, 7, or 10 years and adjusts annually thereafter, based on a fully indexed rate (one-year Treasury Rate, plus margin). The initial rate can change every year after the first 5, 7, or 10-year fixed period by no more than two percentage points, never to exceed five percentage points above the initial rate.
Loan payment example: 10/1 ARM payment example for a $180,000 loan with a 6.375% rate and 7.074% APR, the first 120 payments are $1,122.97, with 12 payments at $1,308.08 if the rate adjusts to the annual maximum of 8.375%, 12 payments at $1,409.96 if the rate adjusts to the annual maximum of 10.375%, 216 payments at $1,570.38 if the rate adjust to the lifetime ceiling of 11.375%.
Payments do not include amounts for taxes and insurance premiums and the actual payment obligation will be greater.