Adjustable Rate Mortgages

Adjustable rate mortgages (ARMs) offer a lower interest rate than fixed rate mortgages during their introductory period. This fixed portion of an adjustable rate loan is usually 1, 3, 5, 7 or 10 years. After that, the rate adjusts periodically based on a market index, the most common ones being, the Treasury Bill, CDs, LIBOR and COFI. To protect against rising rates, ARMs have built-in rate protection in the form of an adjustment cap.

Our mortgage programs

The Pennsylvania Mortgage Store offers adjustable rate mortgages with some of the lowest rates available to you. Some of the programs that we can offer to qualified borrowers:

Adjustable rate mortgages offer:

• lower initial interest rates: Interest rates are lower than fixed rate mortgages during the introductory period.
• flexibility: Move, refinance once rates drop, use your mortgage as a hedge, do a lot more than a traditional fixed loan while the payments are low.

Ideal for borrowers that:

• need to improve their credit
• expect to sell their home or investment property within 5 years
• plan on refinancing before reaching the adjustable period of the loan
• don't mind a degree of uncertainty with monthly payments
• expect to have higher earnings in the future

How to evaluate ARMs

When comparing adjustable rate loans consider the market index, the margin and the rate cap:

Index:

The debt security's rate that is then used to calculate interest on an adjustable rate mortgage. Popular indexes are the one-year U.S. Treasury security and the London Inter-bank Offered Rate (LIBOR).

Margin:

A set percentage, usually 2-3%, that is added to the index during the semi-annual or yearly adjustment to determine the loan's new rate.

Rate Cap:

The maximum amount that the interest rate can increase or decrease during each adjustment.

For help in selecting the right loan, contact the Pennsylvania Mortgage Store today by either submitting a form below or by calling one of our mortgage professionals by phone. Our advice is free of charge and there is no obligation to use our services.

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