Adjustable ARM

Barrett Financial Group, LLC offers Adjustable Rate Mortgages (ARMs), providing borrowers with flexible home loan options. ARMs are loans with an interest rate that can vary over the loan term, allowing borrowers to benefit from lower initial rates and potentially afford a more expensive home.

With ARMs, the interest rate is typically fixed for an initial period, ranging from 1 month to 10 years. After this initial period, the rate may adjust based on prevailing market conditions. This initial lower rate can make homeownership more accessible and allow borrowers to take advantage of favorable market conditions.

Adjustable rate mortgages are usually amortized over 30 years. The interest rate adjustments are determined by adding a "margin" to an "index." The margin, typically ranging from 1.75% to 3.5%, depends on the chosen index and the loan amount relative to the property value. The index represents the financial instrument to which the ARM loan is tied, such as the 1-Year Treasury Security, LIBOR, Prime, 6-Month Certificate of Deposit (CD), or the 11th District Cost of Funds (COFI).

When it's time for the ARM to adjust, the margin is added to the index, rounded to the nearest 1/8 of a percent, to determine the new interest rate for the next adjustment period. The adjustment can occur annually, but there are "caps" in place to limit the extent of rate changes. Caps restrict how much the interest rates can adjust, providing borrowers with stability and protection. For example, a "3/1 ARM" with a 2% initial cap and a 6% lifetime cap, starting at an initial rate of 6.25%, would have a maximum rate of 8.25% in the fourth year and a maximum lifetime rate of 12.25%.

At Barrett Financial Group, LLC, we understand the intricacies of adjustable-rate mortgages and can help you navigate the process. Our experienced team will guide you in selecting the right ARM product for your needs, ensuring you understand the risks and benefits associated with these loans. Contact us today to explore how an adjustable-rate mortgage can provide flexibility and affordability for your home financing needs.