Adjustable Rate Mortgages

family in front of house



What is an Adjustable Rate Mortgage?

An adjustable rate mortgage (ARM) is a home loan in which the initial fixed rate is discounted for a specific amount of time during the beginning of the loan, and can change or “adjust” after that initial period ends.  Adjustable rate mortgages are typically based on a 30-year loan.

The homeowner’s monthly payments will begin with the discounted rate for the first 5, 7, or 10 years, depending on the length of the ARM loan. 


What Happens After the Initial Fixed Rate?
After the initial fixed rate, most ARMs interest rates change year to year, based on a margin and index with cap limits applied.


The Benefits of an Adjustable Rate Mortgage:

  • Choices of an initial fixed rate that fits the homeowner.

  • Could pay down the loan faster with an initial discounted rate.

  • Option of converting the ARM to a fixed rate mortgage at specific times during the life of the loan.*

  • Could give the future homeowner the ability to qualify for a larger loan amount.

Use American Eagle Credit Union’s tools to find the best rates in your area, and then visit our mortgage calculators.

Ready to Invest in Your Dream Home?  American Eagle Credit Union offers a variety of home loan options for any family.  Learn more about the home buying process on our Home Loan Basics page today or talk to one of our knowledgeable mortgage loan officers.


*Converting to a fixed rate mortgage at conclusion of ARM is available with certain home loans.

Thank you for your thoughts and comments on this blog topic. We welcome hearing from you. For your security, please do not to request transactions to your account in your comments. Additionally, do not include confidential information in your comments as this communication is not a secure channel for transmission.