Adjustable Rate Mortgage

Adjustable rate mortgage programs give immense flexibility to existing home owners and home buyers to better manage their finances. With an adjustable rate mortgage you can opt for an initial fixed interest only period followed by a specified repayment schedule in which the rate changes according to the adjustable rate index terms.

Popular thought on the adjustable rate mortgage is that it is potentially riskier as compared to a fixed rate mortgage. This is primarily because your payments can change considerably based upon the index your rate is tied to. However, that risk really is tied directly to your short and long term financial strategy. As the typical ARM program has a lower initial interest rate, you will be rewarded with a lower mortgage payment which can be reduced further if you elect to opt for an interest only period. At 1st Continental Mortgage we advice our clients based upon their short term and long term strategies. We recognize the adjustable rate mortgage is simply not the right program for some situations. Give us a call to find out more!

Understanding an ARM loan is pretty important. Beyond the fixed period of the loan, once the fixed period is over, the new rates applied will typically increase in one or two percent increments. Increases will be based upon the index your ARM is tied to and the margin rate you are paying. ARM programs make absolute sense when interest rates are predicted to fall. With rising interest rates you will end up paying more towards ARM than you would over a traditional fixed rate period. However, they can be very beneficial in the right situations regardless of market trends.

So does a ARM have any benefits? Absolutely. Here are just some of the benefits you can expect to experience with an ARM program.

• A adjustable rate mortgage will typically provide a short-term cash flow improvement with your finances
• The initial fixed period with a lower start rate will free up capital early in your loan term
• You can use the freed up cash to pay off your credit cards or utilize it in higher ROI investment opportunities!
• Getting an Adjustable Rate Mortgage can qualify you for a higher loan amount
• With an interest only option tied to a lower start rate arm over a 3 to 5 year fixed plan, you can save significant capital
• An ARM loan can help you to better plan your future when you plan on living in your home for only a short period of time (1-7 years).

With 1st Continental Mortgage, you can rest assured in the knowledge that all of our ARMs have a lifetime rate ceiling that puts a cap on the highest amount of interest that can be applied on the loan and we will fully disclose those terms to you.

There are many different types of ARM programs, and they can be tied to a wide range of well publicized indexes, with various options available based on the time duration of the loan. Here are the most popular types of ARMs:

• 1 Year Adjustable Rate Mortgage - 30-year loan term with rate changes every one year. Risky loan and not recommended
• 3 Year Adjustable Rate Mortgage - 30-year loan term - 3 years fixed, with rate changes every year after the fixed period.
• 5 Year Adjustable Rate Mortgage - 30-year loan term - 5 years fixed, with rate changes every year after the fixed period.
• 7 Year Adjustable Rate Mortgage - 30-year loan term - 7 years fixed, with rate changes every year after the fixed period.
• 10 Year Adjustable Rate Mortgage - 30-year loan term - 10 years fixed, with rate changes every year after the fixed period.
• 3/1, 5/1, 7/1, 10/1 Adjustable Rate Mortgages-3, 5, 7, and 10 years fixed interest rate, paying interest only, before converting in the respective ARMs for the remaining of the 30-year loan duration.