Adjustable Rate Mortgage (ARM)
ARMs usually have a fixed interest rate for an initial period of time and adjust based on current market conditions.
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What are Adjustable Rate Mortgages?
Adjustable Rate Mortgages (ARMs) are loans whose interest rate can vary during the loan’s term. These loans usually have a fixed interest rate for an initial period of time and then can adjust based on current market conditions. The initial rate on an ARM is lower than on a fixed rate mortgage which allows you to afford and hence purchase a more expensive home. Adjustable rate mortgages are usually amortized over a period of 30 years with the initial rate being fixed for anywhere from 1 month to 10 years. All ARM loans have a “margin” plus an “index.”
When the time comes for the ARM to adjust, the margin will be added to the index and typically rounded to the nearest 1/8 of one percent to arrive at the new interest rate. That rate will then be fixed for the next adjustment period. This adjustment can occur every year, but there are factors limiting how much the rates can adjust. These factors are called “caps.”
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APR Calculator for Adjustable Rate Mortgages
The calculator tool provided is for informational purposes only and does not reflect any specific mortgage or home equity line of credit offered by Leader Bank or any specific terms that may be available for such products. For information on available Leader Bank products and services, please contact a Leader Bank loan officer directly. Examples of monthly payment amounts shown in calculators does not include taxes, insurance or any condominium or HOA fees applicable; as such your total monthly housing payment would be higher. For any adjustable or variable rate loan examples provided, interest rate may increase after consummation and your fully indexed rate, annual percentage rate and monthly principal and interest rates may be higher.
