ARM FAQs


At Colonial, we know there is no “one-size fits all” approach when it comes to obtaining a mortgage. Colonial offers a number of mortgage options to homebuyers that align with their current home loan needs. Whether you are looking to build a custom home, purchase a vacation property or are relocating for a new job, we’ve got you covered from start to finish. One thing to consider when you are looking for home loan financing is if an Adjustable-Rate Mortgage (ARM) is the right loan type for you. Below we’ll answer some of the basic questions about ARMs.

 

What is an Adjustable-Rate Mortgage?

An ARM is a type of mortgage in which the interest rate may fluctuate up or down at fixed intervals throughout the life of the loan. Often, the initial interest rate is lower than initial interest rates for a Fixed-Rate Mortgage, making them appealing to many homebuyers.

How Long is the Initial Interest Rate Period?

The initial interest rate of an ARM can vary depending on the type of ARM Loan you receive. For example, Colonial offers 5/1, 7/1 or 10/1 ARMs. In this scenario, your payment will be fixed for the first five, seven or 10 years respectively and then adjusts every year to a new interest rate for the life of the loan.

Do Interest Rates Adjust Up or Down?

Interest rates can adjust to higher or lower rates depending on the interest rate set by the market. Colonial has no influence on whether the rate goes up or down and there are a number of other factors that go into the rate, so contact me so we can discuss further.

Are There Caps on How Much the Interest Rate Can Change?

In many cases, there are caps to how much interest rate can change from year to year with an ARM. This helps protect the borrower from having to take on a new rate that is much higher than their previously locked in rate. I’ll be happy to go into more details with you should you have other questions or concerns.

How Can I Find Out More Information?

If you are looking to purchase a new home, an ARM may be the right loan program for you. To find out more information, visit my website and apply today by selecting my name from the drop-down menu. I’ll be happy to get you prequalified for a mortgage and answer any questions you might have regarding adjustable rate mortgages or any of our other home loan products.

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