Adjustable Rate Mortgages (ARMs)
An adjustable-rate mortgage (ARM) is a home loan with an interest rate that varies according to the benchmark it’s tied to. There is usually an initial fixed (also known as an “introductory) period, during which the rate doesn’t change. After this, the rate will adjust on a regular basis, such as annually. The terms of an ARM loan, including the introductory period, frequency of adjustment, and cap on how much the rate can change, are pre-determined by the lender. BTC Bank proudly offers ARM loans to homebuyers in Northwest Missouri and Lamoni, IA.
Benefits of an ARM Loan
- Potential for a lower monthly payment
- Periodic and lifetime caps on how much the interest rate can change
- A lower rate during the fixed period helps you accumulate equity
- Good for homeowners who plan to sell the house within 5-10 years
When to Choose a Variable Rate Mortgage
The primary appeal of an ARM loan is the initial lower rate during the fixed period. However, when you choose a variable rate mortgage, you take the risk that interest rates will rise in the future. That’s why ARM mortgages may make the most sense for buyers who don’t plan to stay in the house long-term (if you’re buying a ‘starter house,’ for example). You can also refinance into a fixed-rate mortgage if you do end up staying in the house and market rates rise.
Learn more about ARM Loans from your Community Mortgage Lender
Since 1919, BTC Bank has provided personal customer service to local communities in Northwest Missouri. We have a rich history of helping our customers become homeowners and we can help you, too. To explore the benefits of adjustable-rate and conventional mortgages, and explore all of our home loan options, visit a BTC Bank branch near you or contact us today. We have 12 convenient locations in Albany, Beaman, Bethany, Boonville, Carrollton, Chillicothe, Gallatin, Maysville, Osborn, Pattonsburg, and Trenton, MO; and Lamoni, IA.
ARM Loan FAQs
What factors affect an Adjustable-Rate Mortgage?
- Introductory interest rate
- Length of the introductory period
- Frequency (such as one year) of the interest rate change after the introductory period
- The index the rate is tied to
- The margin of percentage points your lender adds to the index rate
- Periodic and lifetime rate caps
- Payment cap
Will adjustable-rate mortgages go up?
Your ARM loan rate may rise after the initial fixed period if the index it’s tied to also rises.
How often do adjustable-rate mortgages change?
Both the length of the initial fixed period and the frequency of rate change afterward are determined upfront. For example, a 5/1 ARM loan will have an introductory fixed-rate period for five years and the rate will adjust every year after that.