How to Get a Fixed-Period ARM Mortgage

An adjustable rate mortgage, commonly called an ARM, is a mortgage loan where the rate gets reevaluated every year. The interest rate on the loan can go up or down, depending on current market rates. A fixed-period ARM mortgage is a loan that has a fixed interest rate for an agreed upon term, usually 3 to 10 years, and then operates as an adjustable rate mortgage after that.

Difficulty: Easy

Instructions

1. Understand the risks of an ARM. If you choose a fixed rate mortgage, your monthly payment will be the same for the entire length of the loan. With an adjustable rate mortgage, you are running the risk that your payments might go up. With a fixed period ARM, you are delaying the risk during the fixed period but have to face it when the fixed period ends.

2. Think about how long you intend to keep your home. If you are only going to hold your home for a short period of time and plan to sell it before the fixed period ends, a fixed period ARM might be the best choice. Fixed-period ARMS often offer the lowest interest rate.

3. Know the market trends. If you are securing your mortgage loan during a time when interest rates are low, it makes more sense to choose a fixed-rate mortgage to ensure that you get the low rate for the life of the loan. If rates are high when you are applying for your mortgage, a fixed-period ARM is a good choice. By the time the rate comes up for adjustment, average rates may be down and your rate will go down accordingly.

4. Get rate quotes from several mortgage lenders before committing to a loan. When getting mortgage quotes, be sure to ask the lender not only the interest rate that the loan will carry but any other fees that are charged as well. Go with the lender that offers the lowest rates and fees.