Watch Angela’s video on Understanding Adjustable Rate Mortgages (ARM)s on YouTube: https://youtu.be/fnTVCzINcus
If you know you are going to be in your home temporarily, an Adjustable Rate Mortgage is a great product. You’ll get the benefit of a lower interest rate for the time you’re living in the home.
Adjustable Rate Mortgages come in terms of 1, 3, 5, 7, and 10 years. This means your initial rate is locked in for however long your term is. For example, a 5-year ARM means your initial rate is locked in for 5 years. After 5 years, your rate is subject to adjustment. The index is what determines your rate and the caps determine how much your rate can adjust.
Entering into an Adjustable Rate Mortgage, you’ll want to make sure you know the terms of the loan, what the caps are, what the maximum rates are, and when the rate is going to adjust.