Adjustable-Rate Mortgage Loan
Also known as an ARM, this super special home loan starts you off on the right foot with a low, fixed rate.
ARMs are more than body parts!
Just like your own arms, adjustable-rate mortgages are extremely useful. An ARM gives you a lower monthly payment at the beginning of your term so you’ve got extra time to get all your ducks in a row.
The Details
It’s true the fractions make ARMs look a bit complicated. 5/1. 10/1. What gives? Luckily, it’s not all that hard once you get a little insider info. The first number is how many years you get a low, fixed rate. The second number is how often your rate will adjust after your intro period ends.
So, 5/1 means you’ll get an amazing rate for five years then your rate will likely change every year after that. Change with what, you ask? Well, your rate will start going up and down with those invisible forces known as the market. (Your monthly payment will rise and fall, too.) The point is, you can use those first years to supercharge your income!
So What Am I Getting?
Low, Fixed Initial Rate
The intro rates for ARMs are usually lower than the APR for fixed-rate mortgages.
Buy Yourself Time
Use the initial period of your ARM to boost your income and pay down debt before your rate adjusts.
Higher Loan Amount
An ARM lets you borrow more at lower starting rates, plus you can choose a 40-year term!
Adjustable-Rate Mortgage Loan Rates
|
LOAN TYPE |
TERMS |
APR* |
|---|---|---|
|
LOAN TYPE 5/1 ARM |
TERMS 30 |
APR* As low as 6.624% |
|
LOAN TYPE 10/1 ARM |
TERMS 40 |
APR* As low as 6.984% |
The lowdown on what you'll need:
Applying for an adjustable-rate mortgage (ARM) is just as easy as applying for all those other kinds of home loans. You’ll simply need to show us the most recent or current versions of these documents:
- Driver’s license or identification card to get the ball rolling
- Bank statements and proof of any other assets, so we know you mean business
- Tax returns (yay!)
- Pay stubs, W-2s, 1099s to let us know where you’re at income-wise
- Gift letters if anyone (besides us!) is helping you out
- Evidence of your renting history, homeownership, or another way you’ve got a roof over your head
- Credit history – it’s a nice idea to find out your score for yourself before we ask FICO for your report
Our streamlined ARM loan process
Get to work finding all the documents and information mentioned above.
Talk to one of our home loan gurus about which ARM is right for you.
Decide if you want to apply online, over the phone, or in-branch.
We’ll run the numbers and get back to you with an answer or a request for a little more information.
Let’s go ahead and assume you’re pre-approved – you can now start house hunting!
You put in an offer then the fun part starts. We’ll hold your hand all the way through closing!
2 great payment options, the choice is yours!
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Payroll Deduction
If you have a loan with the credit union, payroll deduction is a convenient way to have your loan payments automatically deducted from your paycheck.
To find out if you’re eligible for payroll deduction, contact your employer’s benefits department. If you already have payroll deduction set up with the credit union and want to set up automatic loan payments, call us at (818) 238-2900.
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Automatic Transfers
Automated transfer allows members to transfer funds within UMe accounts on a recurring schedule.
You can set up an automatic transfer to make your loan payment, so you won’t have to think about it each month.
To set up an automatic transfer, fill out our Share to Loan Transfer Form or give us a call at (818) 238-2900.
Adjustable-Rate Mortgage Loan FAQs
Both types of mortgages start out with fixed rates but then they take different paths to get to the finish line, (What finish line, you ask? The day you’re mortgage-free and own your home outright!)
Here’s how it works. An adjustable-rate mortgage offers you a low, fixed rate at the beginning of your term. Let’s say, for the first five or ten years. During this time, you get a lower monthly payment so you can build resources for when your rate (and monthly payment) starts adjusting.
On the other hand (of your ARM!), a fixed-rate mortgage offers the same rate through the life of your loan so your monthly payments are always the same, too.
Both types of home loans have their good bits and slightly less good bits. It might help to see a list of pros and cons then you can decide which one matches your goals and personality type.
- PRO of fixed rates: You get the security of always knowing what your rate will be and your monthly payment will also stay the same. This makes budgeting simple.
- CON of fixed rates: The starting rate for a fixed-rate mortgage is usually slightly higher than for an ARM.
- CON of fixed rates: Your rate will sometimes be higher or lower than the market rates – so sometimes you might feel like you’re getting a bargain and other times you might wish your rate was free to drop.
- PRO of ARMs: The starting rate for an ARM is usually lower than for a fixed-rate mortgage and it will stay this way for an agreed amount of time, so you can plan for a possible increase when your rate starts adjusting.
- PRO of ARMs: You might be able to borrow more than for a fixed-rate mortgage.
- PRO of ARMs: You might be able to get a whopping 40-year term.
- CON of ARMs: Once your rate starts adjusting, consider yourself seated on a gentle rollercoaster, going up and down as the markets run their natural course.
Adjustable-rate mortgage loans come in many shapes and sizes, just like the arms between our shoulders and fingers. Here’s a quick explainer of the numbers you might see in your research.
- 30 year 5/1, 7/1, and 10/1 ARM: You get a low fixed rate for 5, 7, or 10 years, then your rate adjusts every year up or down until the end of the agreed upon 30 year term.
- 40 year 10/1 ARM: You get a low fixed rate for 10 years, then your rate adjusts every year up or down until the end of the agreed upon term of 40 years. (A 40 year term gives you the best chance at the lowest payment possible).
It’s a good thing you asked because there is a tiny bit more to the wondrous world of adjustable-rate mortgages. It’s something we in the business call a cap, like the one you might wear on your head (shoulders, knees, and toes, knees and toes). Except here it’s more like a maximum or a limit.
- Initial cap: How much your rate can adjust the first time after your fixed-rate period has ended.
- Periodic cap: How much your rate can go up from one adjustment to the next.
- Lifetime cap: How much your rate can go up (or down!) over the life of the loan.
And if you truly want to know more about this kind of stuff, just reach out to one of our home loan gurus.