Is an Adjustable-Rate Mortgage Right for You?

An adjustable-rate mortgage is a home loan with an interest rate that remains fixed for an initial period before becoming subject to adjustments.

Unlike a traditional fixed-rate mortgage, which maintains the same interest rate throughout the loan term, an ARM provides an initial fixed-rate period followed by a variable-rate period.

This means your interest rate and monthly principal-and-interest payment may increase or decrease after the initial fixed-rate period ends.

At Fort Financial, we offer three adjustable-rate mortgage options: 5/1, 7/1 and 10/1, all amortized over a 30-year term.

Here's how they work:

• 5/1 Adjustable-Rate Mortgage
  • A 5/1 ARM offers a fixed interest rate for the first five years. After that, the rate may adjust once per year based on your loan terms.
• 7/1 Adjustable-Rate Mortgage
  • With a 7/1 ARM, your interest rate remains fixed for the first seven years, providing a longer initial fixed-rate period before potential annual adjustments begin.
• 10/1 Adjustable-Rate Mortgage
  • Our longest initial fixed-rate option, a 10/1 ARM keeps your interest rate fixed for the first 10 years. After that period, your rate may adjust annually according to your loan terms.

The key difference is the length of time your initial interest rate remains fixed. All three options give borrowers an opportunity to explore competitive initial mortgage pricing while considering their longer-term financial plans.

An adjustable-rate mortgage may offer several advantages, depending on your circumstances.

• Competitive Initial Interest Rates
  • ARMs may offer lower initial interest rates than comparable fixed-rate mortgages. This could result in lower initial monthly principal-and-interest payments, depending on the rates and terms available when you apply.
• Flexibility for Your Homeownership Plans
  • If you anticipate moving, selling your home or refinancing in the future, an ARM may be worth considering. However, those plans aren't guaranteed, so it's important to understand how future rate changes could affect your payments.
• Options to Fit Your Financial Goals
  • With different initial fixed-rate periods available, you can explore which mortgage structure may better align with your financial situation and expected time in your home.

While adjustable-rate mortgages offer potential benefits, it's important to understand how they differ from fixed-rate loans.

Once the initial fixed-rate period ends, your interest rate may increase or decrease based on the terms of your mortgage. An increase could result in a higher monthly payment.

Before choosing an ARM, consider how long you plan to stay in your home, how comfortable you are with potential payment changes and whether your budget could accommodate a higher payment in the future.

A Fort Financial mortgage loan originator can explain the available options, including rate adjustment limits, and help you evaluate what works best for your situation.