Adjustable Rate Mortgage
An ARM is an Adjustable Rate Mortgage. Unlike fixed rate mortgages that have an interest rate that remains the same for the life of the loan, the interest rate on an ARM will change periodically. The intial interest rate of an ARM is lower then that of a fixed rate mortgage, consequently, an ARM maybe a good option to consider if you plan to own your home for only a few years; you expect an increase in future earnings; or, the prevailing interest rate for a fixed mortgage is to high.
While ARMs can offer lower initial payments, it’s important to understand the risks that come with them. After the introductory period ends, your interest rate — and therefore your monthly payment — can rise significantly depending on market conditions. This uncertainty makes ARMs less predictable than fixed-rate mortgages, so they may not be the best fit if you value long-term stability or plan to stay in your home for many years.
Adjustable Rate Mortgage Characteristics
1) An ARM starts with a lower initial interest rate compared to most fixed-rate mortgages, making early payments more affordable
2) After the introductory period, the interest rate adjusts at set intervals based on changes in a financial index
3) Monthly payments can increase or decrease over time depending on market interest rate movements
4) Most ARMs include caps that limit how much the interest rate and monthly payment can change at each adjustment and over the life of the loan
5) They are often attractive to buyers who plan to sell or refinance before the first adjustment period
6) Borrowers may save money in the short term compared to fixed-rate loans, especially if they do not keep the mortgage long term
7) ARMs carry more risk than fixed-rate mortgages since future payments are uncertain
8) They can be a strategic choice for those expecting income growth or short-term homeownership, but less ideal for buyers seeking stability and predictability
5) VA loans do not require mortgage insurance, which can save borrowers money on their monthly payments
6) VA loans have flexible credit requirements, which can help borrowers with less-than-perfect credit still qualify for a mortgage
7) VA loans can be used to purchase a variety of property types, including single-family homes, multi-unit properties, and condominiums
8) VA loans allow for options for refinancing, including streamline refinancing and cash-out refinancing, which can help borrowers lower their monthly mortgage payments or access equity in their home.
Disclaimer: Johnnie Fleming, NMLS #1177346 – NEXA Mortgage ("LD," "We," "Us," "Our") is exempt from mortgage and NMLS licensing for the states we lend in. Our loan products require a business purpose, and the property must be used as a non-owner-occupied investment property, also known as a rental property. Our rates, loan terms, and loan conditions are only offered to qualified borrowers, and may vary based on loan product, credit score, real estate investment experience, deal structure, property state, and several other applicable considerations. Our rates, loan terms, and quotes, are subject to change daily, at any time, with or without notice. Loans requiring less documentation may result in a higher interest rate and higher annual percentage rate ("APR").
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