A lower initial monthly paymentChoose from 5, 7, or 10-year ARMsSave even more if rates drop later
Start with a lower rate than most 30-year fixed-rate loan options.
Pay less each month and keep more cash in your pocket for other expenses.
Lock in bigger savings if interest rates drop after your fixed-rate term.
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See your best loan options with technology that analyzes your finances in real time.
Pick the right loan and term that helps you achieve your unique homeownership goals.
Get approved and funded quickly, so you can enjoy your new financial freedom.
See your best loan options with technology that analyzes your finances in real time.
Pick the right loan and term that helps you achieve your unique homeownership goals.
Get approved and funded quickly, so you can enjoy your new financial freedom.
An adjustable-rate mortgage (ARM) offers a lower rate during the initial fixed period, then adjusts based on a market index every six months.
5/6, 7/6, or 10/6 ARMs; the first number is the years of a fixed-rate introductory period; the second is months between adjustments after the intro ends.
ARMs typically price below comparable fixed-rate loans during the intro period. Apply online to see introductory rate options.
Standard 30 to 45-day closing timelines apply. ARM disclosures are longer because of the rate adjustment mechanics.
When the intro period ends, the rate adjusts every six months based on the index plus margin in your note. Initial, periodic, and lifetime caps limit how much the rate can move.
If you plan to sell or refinance before the intro period ends, an ARM captures the lower intro rate without paying for long-term certainty you won't use.
ARMs aren't for everyone, but for the right buyer with the right time horizon, the lower intro rate is real savings.
If you know you'll sell or relocate within the intro period, you capture the lower rate and exit before adjustments begin.
If you expect a major income increase or rate environment shift, an ARM keeps payments low while you wait.
The lower intro payment can make a more expensive home affordable today, with a plan to refinance or sell as your situation changes.
Military, medical residency, corporate rotations; when you know the move is coming, you don't pay for permanence you won't use.
ARM underwriting is similar to fixed-rate, but with one key difference: lenders qualify you at the higher of the intro rate or a stress-test rate.
620+ for conventional ARMs; some loan types allow lower. Higher scores get tighter pricing on both the intro rate and the margin.
Calculated using the qualifying rate (often the greater of the note rate or the fully-indexed rate), not just the intro rate.
5% or more on conventional ARMs is typical; 3.5% on FHA ARMs. Lower down payments mean PMI or MIP.
Paystubs and a two-year W-2 history (or self-employment returns); lenders often want cash reserves on top to cushion against future payment increases.
An ARM trades long-term certainty for a lower initial rate; a worthwhile trade only if your time horizon is short.
An ARM can save real money or cost you real money, depending entirely on how long you stay and where rates go.
ARMs typically price below comparable fixed-rate loans during the intro period, which means a lower monthly payment from day one.
A lower rate qualifies you for a larger loan amount, which can be the difference between getting the home and not.
Lower interest means more of each payment hits principal during the fixed-rate window.
Initial, periodic, and lifetime caps put a ceiling on how high your rate can climb, even in a sharply rising market.
If the index falls when your loan adjusts, your payment can decrease; something a fixed-rate loan never does.
When the fixed period ends, your rate can rise to the cap. Budget for the worst-case payment, not the best-case.
If rates have risen or your equity, credit, or income has slipped, you may not qualify to refinance out of the ARM.
Index, margin, caps, adjustment frequency, and floor all matter. The note is longer for a reason.
You don't know what years 8, 12, or 20 of the loan will cost, which makes retirement and savings planning harder.
If rates rise sharply and stay high, you carry the cost; not the lender.
An adjustable-rate mortgage is a home loan with an interest rate that stays the same for a set amount of time and then changes based on a market index. This means that your monthly payment can go up or down over time. Continue Reading...
One of the main advantages of an adjustable-rate loan is the initial lower interest rate term, where your monthly payment will remain the same for the initial period before rate adjustments start. This helps with budgeting because you’ll know how much your monthly principal and interest payments will be for 5, 7, or 10 years.
As you explore different types of home loans, choosing between an ARM loan and a fixed-rate loan will depend on your financial profile and risk tolerance as well as market rates. If you don’t plan on staying in your home for a long period, usually less than 10 years, then an ARM could be a good option to take advantage of the initial lower interest rate. However, a fixed-rate loan may be the better option if you prefer predictability.
To help you decide between an adjustable or fixed rate, speak with one of our Loan Experts to discuss your loan options.
Yes, you can refinance an ARM loan. Refinancing can help you secure a lower interest rate or change the terms of your loan.
Yes, an adjustable-rate mortgage (ARM) and a variable-rate mortgage are the same. Both terms refer to a home loan with an upfront fixed-rate period and scheduled rate increases afterward.
Yes, you can pay off your ARM loan early. Making extra payments — or paying off the loan entirely ahead of schedule — can help you save on interest over time, especially if you plan to stay in your home beyond the initial fixed-rate period.
Some ARM loans come with prepayment penalties, which are fees charged if you pay off your loan within a certain time frame (usually the first few years). AmeriSave doesn’t include prepayment penalties on any of our ARM loans.
After the initial fixed-rate period, an ARM loan’s interest rate adjusts periodically based on an underlying market index such as the prime rate or the Secured Overnight Financing Rate (SOFR). Your adjusted rate is the index rate plus a set margin determined by your lender. ARMs also come with rate caps that protect you from large increases in interest rates.
