ARMs are also called variable-rate mortgages or floating mortgages. With an adjustable-rate mortgage, the initial interest rate is fixed for a period of time. After this initial period of time, the interest rate will reset periodically, typically at yearly intervals.
Adjustable-Rate Mortgage Highlights
An ARM might be the right option for you if you plan on moving within 7 years since they feature lower introductory interest rates. If interest rates are expected to fall, a homeowner could potentially reduce their monthly payments with the lowered interest rates. Highlights of an adjustable-rate mortgage include:
- Lower initial monthly payments
- Can be a smart choice for buyers planning to pay off the loan within a specific amount of time
- Rates and Payments may decrease based on the index rate