These are very flexible loan. There are enough options here to customize your loan to your needs, to provide the payment schedule you can afford, and to take advantage of market interest rates.
With an Adjustable Rate Mortgage, you'll get started at lower payments than most other mortgage options, which may allow you to qualify for a higher loan amount. The rate is adjusted periodically (every 1, 6 or 12 months), following the interest rate index you choose. And a maximum interest rate ceiling keeps your rate protected by limiting the top rate you can be charged.
Some ARMs offer a conversion option in which you can convert to a Fixed Rate Loan. The conversion option takes a bit of the risk out of fluctuating interest rates.
Our Standard ARM has a maximum limit on how high your interest rate can go. Plus, ARMs can be assumed by a qualified buyer of your home. And with our Standard ARM, there's no deferred interest, so that years down the road, you can't be surprised by increases in your loan amount.
These loans also feature a lower rate and payment at the beginning of your loan. Your rate and payments adjust periodically based on an independent index. Your monthly payment can go down if rates are low when your adjustment occurs and you can protected yourself from sudden rate increases by selecting an arm with a "rate cap".
They also have an added bonus on having higher qualifying ratio's.
For an in-depth explanation concerning Adjustable Rate Loans, see the Federal Reserves booklet on adjustable rate loans.