Adjustable Rate Mortgages

The interest rate of an Adjustable Rate Mortgage (ARM) changes according to a predetermined timeframe based on fluctuations in specific market interest rates.

To moderate or reduce extreme fluctuations, ARMs have adjustment caps, which limit the amount an interest rate can change within a given time period. In effect, caps place ceilings on, or limit how high a rate can go within a specific timeframe.

Adjustable Rate Mortgages have a loan term of 30-years, with a fixed introductory period ranging from 6 months to 10 years. Many borrowers choose a shorter fixed introductory period to obtain a lower rate for the length of that period. In most cases, the introductory period matches the borrower's timeframe for carrying the mortgage, which means the mortgage will be either refinanced, or the property will be sold prior to the end of the introductory period. After the initial fixed period, it will convert to an adjustable rate mortgage, and the interest rate will adjust according to fluctuations in the market.

Adjustable rate mortgages are offered on Conforming & Jumbo (loans above $333,000) Loan amounts as well as being offered on Full Doc, Stated Income (No Income Verification), No Ratio, Stated Assets, and No Documentation Mortgages. What follows are brief descriptions of some of the more common and popular ARM programs.

- 1- or 3-Month Adjustable Rate Mortgage. This type of mortgage is actually fixed for the 1st year. After the 1st year, its interest rate may change every three months. Especially advantageous for borrowers who need a low payment for the 1st year. Offered mostly on COFI, MTA, COSI, or CODI indexes. Available with...
-- Interest only option.
-- 12 Mat, Pick a Payment - 4 Payment Option ARMs.

- 6-Month Adjustable Rate Mortgage. This type of mortgage changes its interest rate every six months. When interest rates are perceived as declining, this very short term ARM often enables borrowers to secure lower rates which mean lower payments on their mortgages. Available with...
-- Interest only option.
-- 12 Mat, Pick a Payment - 4 Payment Option ARMs.

- 1 Year ARM / 6 Month Adjustable Rate Mortgage. Offers an initial fixed rate for the first year, then converts to a adjustable rate for the remaining 29 years. Generally, this type of financing offers a lower initial rate than a 3 year ARM / 6 month ARM. Available with...
-- 1-year interest only option.

-- 2-Year ARM / 6-Month Adjustable Rate Mortgage. Offers an initial fixed rate for a three-year period, then converts to an adjustable rate mortgage for the remaining 28 years (2/28 arm). Generally, this type of loan offers a lower initial rate than a 5-year ARM / 6-month ARM. Available with...
-- 2-year interest only option.

-- 3-Year ARM / 6-Month Adjustable Rate Mortgage. Offers an initial fixed rate for a three-year period, then converts to an adjustable rate mortgage for the remaining 27 years. Generally, this type of financing offers a lower initial rate than a 5-year ARM / 6-month adjustable. Available with...
-- 3-year interest only option.

-- 5-Year ARM / 6-Month Adjustable Rate Mortgage. Offers an initial fixed rate for a five-year period, then converts to an adjustable rate mortgage for the remaining 25 years. Generally, this type of loan offers a lower initial rate than a 7-year fixed /6-month ARM. Available with...
-- 5-year interest only option.

-- 7-Year ARM/6-Month Adjustable Rate Mortgage. Offers an initial fixed rate for a ten-year period, then converts to an adjustable rate for the remaining 20 years. Generally, this type of financing offers a lower initial rate than a 30-year fixed-rate mortgage. Available with...
-- 7-year interest only option.

-- 10-Year ARM/6-Month Adjustable Rate Mortgage. Offers an initial fixed rate for a ten-year period, then converts to an adjustable rate for the remaining 20 years. Generally, this type of financing offers a lower initial rate than a 30-year fixed-rate mortgage. Available with...
-- 10-year interest only option.

Mortgage Match is the internet's leading website for zero down, interest only mortgages, and 12 MAT, Pick-A-Payment mortgages, as well as non-resident alien mortgages; all of which may use many of the ARMs described above. To talk with a Senior Loan Consultant, about obtaining an ARM for either a purchase or refinance mortgage, please call toll-free: 1.888.890.5625. Or, to schedule a free, phone consultation with a highly-experienced Mortgage Match consultant, simply click here.