Benefits of an Adjustable-Rate Mortgage (ARM)

What exactly is an ARM?

An Adjustable-Rate Mortgage (ARM) is a type of home loan that initially offers a fixed interest rate over a set period of time, typically 5, 7, or 10 years. This initial period provides borrowers with stability and predictability in their monthly mortgage payments. Once the fixed period ends, the interest rate on the loan can adjust up or down based on market conditions and the terms of the loan agreement. This means that the monthly payment amount can also change, depending on the new interest rate. The adjustment usually occurs on an annual basis, but can vary depending on the loan terms. ARMs can be a great option for borrowers who plan to sell or refinance their home before the end of the fixed period, or for those who expect their income to increase in the future. It’s important to carefully consider the terms of an ARM before choosing this type of loan, and to work with a trusted lender who can guide you through the process.

What is the difference between a 10/1, 7/1, 5/1, 3/1 and what do all those numbers mean?

When you see terms like a 7/1 or 5/1, the first number is telling you how long the initial fixed period is going to last for (7 years or 5 years respectively in these examples). The second number is telling you that the interest rate will adjust once every year after that initial fixed period is over. Longer loans like a 10/1 or 7/1, give you a longer fixed period than a 5/1 or 3/1 but may have other limits on their terms and conditions. How much the rate will change after this initial fixed period is determined by an index stated on the loan agreement, plus a margin set by the lender. Caps are set to tell you the maximum interest rate that the loan can have, protecting you as the borrower from payment shock. A floor is also set to tell the lender what the minimum interest rate could be.

Why choose Northeast Credit Union for an Adjustable-Rate Mortgage?

The benefits of an ARM are a testament to its current popularity in this high-rate market. Chris Saucier, Vice President of Mortgage Lending at Northeast Credit Union explains, “we’ve seen a big shift in loan production recently with borrowers selecting our Adjustable-Rate Mortgage products. The cost savings compared to a 30-year fixed rate loan is truly significant and is allowing borrowers to keep their monthly mortgage payments more affordable.” ARMs are helping more of our members find the key to owning a home and enjoying the benefits of homeownership.

Our members know the value of local service and Chris confirms that, “all Adjustable-Rate Mortgage products are originated, processed, underwritten and serviced in-house here at Northeast Credit Union, so our borrowers can trust they will work directly with us from beginning to end.” Credit unions are local and neighbors really do make the best lenders.

Trust your mortgage to a local team that makes you feel at home the whole way with Northeast Credit Union.

Give us a call at 888-436-1847 (select option 4), or get pre-qualified and one of our Mortgage Specialists will reach out to discuss what options are best for you. If you’re considering getting an Adjustable-Rate Mortgage, be mindful that the terms, rates, and caps vary by lender.