An adjustable mortgage is one whose rate of interest is adjusted periodically to reflect market conditions. If rates are low or if you only plan on staying in your home for a short time, this is the right loan to consider.
- Interest rates are fixed for 5, 7 or 10 years after which the interest rate may increase or decrease depending on the market.
- Rate changes are capped at 5% above initial fixed rate and 2% or 5% per adjustment period. For example: If the original interest rate is 2.99%, your rate will never be higher than 7.99%, and will never rise more than 2% per year after the fixed-rate period.
- Your actual payment will vary based on your situation and the current interest rates when you apply.
- You can pay off your mortgage at any time without prepayment penalties.
- FHA and VA ARMs are also available for those that want the flexible guidelines of an FHA or VA loan