adjustable rate mortgages

Flexibility is key

With a hybrid ARM (Adjustable Rate Mortgage), the interest rate stays fixed for a defined period of time; at the end of the defined period (typically 3/5/7/10 years), the interest adjusts according to an index. The initial rate on an ARM is typically lower than a corresponding fixed rate mortgage which allows you to increase your loan amount and purchasing power. An ARM’s interest rate is normally tied to an index that tracks with a financial instrument such as a Treasury Security or Secured Overnight Financing Rate (SOFR) or 11th District COFI (Cost of Funds Index).

Down payment

Most conventional ARM’s will require a 5% down payment. There are alternatives available such as an FHA-ARM that will allow 3.5% down.

Rate caps

ARM’s typically have several types of interest rate caps. These caps limit the amount that the interest rate can adjust each adjustment period as well as the maximum interest rate.


Most ARM’s are amortized of 30 years but the initial interest rates stays fixed for a set amount of time before adjusting up or down. Those periods vary from 3 to 10 years.

why an arm?

Maybe you know that you only will be in a home for a few years and move again soon… Why not get a 7 year ARM and take advantage of the lower interest rate for several years? 

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Elliott Bowman

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NMLS # 1982189

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