How an Adjustable-Rate Mortgage Refinance Works
An adjustable-rate mortgage (ARM) refinance is an ideal option for homeowners who want a short-term option with a low initial interest rate. It’s most beneficial for people who expect to have an increase in income or more stable finances in the future when interest rates begin to adjust higher.
Here’s what you can expect with an ARM:
- Lower starting interest rate
- Lower starting monthly payment
- Ability to afford more house space
- Possible to pay less in return, in favorable market conditions
Adjustable-rate options are available from 3/1, 5/1, 7/1, 10/1. The first digit tells you the number of years with the introductory rate. The second digit reveals the length of the adjustment period once it becomes a variable rate. For instance, on a 5/1 rate, the first reset takes place after five years. The next reset can take place one year later, and every 1 year after that, until the end of the loan.
Adjustable rate mortgages offer flexibility and might be the right choice for you if you plan to move within five years. Contact a PrimeLending loan officer to see if an ARM is the right refinance choice for you.