Do you plan to move or refinance in a few years?
Best for people who:
Adjustable-Rate Mortgages (also called ARMs) feature an interest rate that periodically adjusts with changing market rates. ARMs are available in government, conforming and jumbo loan amounts. The ARM allows you to take advantage of lower interest rates in a falling rate environment, and you'll benefit from lower monthly payments. The initial interest rate on an ARM is usually lower than the lifetime interest rate on a fixed-rate mortgage (FRM). ARM interest rates and the degree to which they fluctuate at the end of every adjustment period, are determined by:
Index: Published economic indices such as U.S. Treasury Securities or London Inter-Bank Offered Rate (LIBOR) that are used to direct the adjustment.
Margin: A fixed percentage (usually two to three percent) that is added to the index at each adjustment period
Rate Cap: Typically the maximum amount your rate can increase or decrease per adjustment period (2%) and over the life of the loan (6%). This protects you in case of volatile market swings.
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