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Does an ARM Rate Always Go Up?
Do you have to sell or refinance before an adjustable-rate mortgage starts adjusting? Not necessarily. An ARM's new interest rate depends on the loan's terms and the applicable market index. Understanding how that works can help you evaluate whether an ARM fits your plans, even when your future timeline isn't certain. At Texas Lone Star Lending, we're here to help you understand your options and make informed decisions.
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Read the transcript
One reason people shy away from adjustable-rate mortgages is that they're not sure they'll be able to sell or refinance before the rate starts adjusting.
But here's something important: just because your ARM adjusts doesn't mean your interest rate automatically goes up.
Let's look at an example.
Today, a typical 30-year fixed mortgage rate is around 7.25%.
The index rate used for most ARMs today was 3.92%. Add a typical margin of 2.75%, and you get 6.67%.
So an ARM adjusting today could actually reset to a rate below today's fixed-rate market.
Now, rates could be higher when your ARM adjusts. That's a risk you need to understand.
But you don't necessarily need a guaranteed exit plan to consider an ARM. You need to understand what could happen if you keep it.
And remember - it's always okay to ask. We're here to help you get home.