Adjustable-Rate Mortgage (ARM)

When you’re seeking a home loan with a low interest rate, an adjustable-rate mortgage or ARM may be for you. Although it’s called adjustable, this home loan starts out with a fixed rate for the first few years. Because your rate is subject to change after the fixed period, lenders may offer a lower initial rate on these loans, when compared with a traditional fixed-rate mortgage, for example. Many local residents here in Cumberland and surrounding areas of MD find the ARM is the right choice for home purchase financing.

Explaining the ARM (Adjustable-Rate Mortgage)

The ARM home loan has a fixed rate for the first 6 months, 3 years, 5 years, 7 years, or 10 years, depending upon the type you choose. Interest rates tend to be higher for ARMs with longer fixed periods. When the fixed rate ends, the mortgage rate can change once a year–with the amount of interest tied to a particular rate index which the lender will specify for you up front. The ARM is typically a 30-year mortgage, but, of course, you may decide to sell your home or refinance the loan to a different type well before the payoff date.

Who is the Adjustable-Rate Mortgage Designed For?

Using an ARM home loan to finance your property works well for individuals who plan to reside in the house for a short time—and are planning to sell before the fixed-rate part of the ARM ends. Other home buyers choose adjustable-rate mortgages because they plan to refinance to a fixed-rate loan before the ARM interest rate begins to adjust.

Still other people may choose the ARM because they expect to earn more soon, before the fixed rate ends, and any potential rate increase will still fit into their budget. For homebuyers who will be advancing in their career, getting promoted, or adding a second income earner to the household, by getting married for example, the ARM can also work well. As long as your circumstances allow you to handle a possible interest rate increase, the ARM may be for you.

Adjustable-Rate Mortgage Schedules

The total length of most ARM mortgages is 30 years, with adjustments that will begin after the first 3 years in a 3/1 ARM loan, after 5 years in the 5/1 loan, etc. For the rest of the loan term (that’s 27 years with the 3/1 ARM), your rate adjusts annually. Since it adjusts once per year, the loans are described as 3/1, 5/1, etc. Interest rate adjustments will take place annually until the end of the 30-year term, or until you refinance your mortgage or sell your house.

How to Apply for an ARM the Hassle-Free Way

When you’re looking for a home in the Cumberland area, Homespire Mortgage is ready to help set up your financing. If you’re interested in an adjustable-rate mortgage, we make the application process simple for you. Feel free to call on us if you need more information on other mortgage options as well. We serve the local areas of Frostburg, MD, Cumberland, MD, Lonaconing, MD, and Westernport, MD from our headquarters in Cumberland. In WV, we provide mortgages in Short Gap and Keyser, and in PA we serve the Bedford areas.

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