Adjustable rate mortgages provide lower payments early on when you need it


If you are looking for lower rates and payments early on in a loan term, an adjustable rate mortgage (ARM loan) may be your best option for purchasing the home you want. Capital Net Bank’s expert mortgage lenders explain today’s rates for ARM loans in simple terms along with other types of mortgages to help you select one that best suits your financial situation.


Adjustable rate mortgages from Capital Net Bank differ from fixed rate mortgages because the interest rate and monthly payment move up and down with fluctuating market rates. ARMs are named with two numbers; the first number is the time period where the interest rate is fixed. The second number indicates the period of time when the interest rate may change.

For example, a 5/1 ARM means that for the first five years the interest rate does not change. After that period the rate may be adjusted once per year.

Most ARMs begin with a fixed-rate period when your rate does not change.
Capital Net Bank offers 5/1, 7/1, and 10/1 ARMs.

Once the fixed-rate period expires, your loan will adjust each year based on information detailed in your closing documents.
Interest rates after the fixed-rate period may increase or decrease annually.
Advantages of an ARM loan

Lets you take advantage of falling interest rates without refinancing. When interest rates fall, your ARM rates and payments fall too.
Initial payments are lower early in the loan, which allows you to invest those savings in other, higher yield investments.
ARMs are a great option if you plan to move before the end of the fixed-rate period because potential rate increases will not matter. And if you are expecting an increase in your income, an ARM may be a good choice because the potential increase in rates will not significantly impact your monthly budget.


Considerations

ARMs can be complex to understand due to their flexibility.
Over the loan’s full term, payments and rates can change significantly.
The first adjustment can be dramatic if rates rise quickly.
There are caps that limit the rate changes you can expect when the fixed period ends, and on how much the rate can change each year.
Let our mortgage experts help you get pre-approved now!

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