Unlike a true variable-rate mortgage, a hybrid ARM loan is a home loan with an interest rate that changes periodically after an initial fixed-rate period. This means your monthly payments could go up or down after the fixed period ends with interest rate adjustments based on prevailing rates.

During the initial fixed-rate period, your ARM loan rate remains the same, offering stability and predictability in your monthly payments. APGFCU offers three types of mortgages: 5/1, 7/1, and 10/1 loan terms. The first number represents the fixed-rate years, and the second number indicates that the rate will change every year after.

Interest rate caps limit how much your interest rate can increase or decrease during each adjustment period after the fixed-rate period ends. This protects you from significant rate hikes above your initial interest rate and helps limit potential increases in your monthly payments.

For APGFCU's 5/1, 7/1 and 10/1 ARMs, the yearly cap is 2% and the lifetime cap is 5%. This means that in any single year, the rate cannot adjust more than 2% above or below your existing rate, and no more than 5% above or below your original rate.

Yes.  During the adjustment period, your interest rate will be determined by adding a fixed margin of 2.750% to the then current value of the 1-Year Constant-Maturity Treasury (CMT) index, rounded to the nearest 1/8%.  If the result is an interest rate lower than your current rate, your payment could decrease.  However, the calculation can also lead to a higher interest rate and a higher monthly payment.

An ARM loan can be a good option if you plan to sell or refinance your home before the fixed-rate period ends or if you expect your income to increase in the future. It also offers lower initial payments than a fixed-rate mortgage, which can be beneficial for borrowers who need more flexibility in their monthly budget.