If you’re looking to buy a house but are concerned about locking in an interest rate now that rates are on the rise, an adjustable-rate mortgage (ARM) might be for you.
An ARM gives you a fixed interest rate over a predetermined number of years (i.e. 5, 7, or 10), followed by a variable rate that adjusts every year based on the SOFOR index after the fixed-rate period is over. Thus, a five-year ARM is referred to as a 5/1 ARM. Some ARMs adjust every six months after the fixed-rate period (i.e. a 5/6).
An ARM is attractive to homebuyers for several key reasons.
First, the interest rate during the fixed-rate period is often lower than what is available on fixed-rate mortgages with longer terms.
Second, if you don’t think you’ll be in your new home long-term (and considering the average homeownership tenure, according to ATTOM Data Solutions, is around eight years, there’s a good chance you won’t be), you can take advantage of the lower rates and sell your home before the potential rate increases go into effect. Of course, you can always refinance if you decide to stay in the home and if rates are better at the end of your fixed-rate period.
Third, if you feel like you’ve missed the boat on refinancing as rates have started to climb, refinancing into an ARM may help, especially if you think you aren’t likely to stay in your home beyond the fixed-rate period.
So what kind of ARMs do we offer?
We’re so glad you asked.
We offer 5/1, 7/1, and 10/1 ARMs, and not only do we offer ARMs on purchases, but we also offer ARMs on refinances and construction with our one-time close construction-to-permanent mortgage.
If you have questions or think an ARM might be right for you, click here to schedule a conversation with a Mortgage Loan Officer today.
Loans subject to membership, creditworthiness, and approval.
Equal Housing Opportunity Lender
Equal Housing Opportunity Lender