ARMs offer a cheaper option for homebuyers who don’t plan to live in one place for very long.

Prospective homebuyers face many challenges these days, including the recent inflation of home prices. One way to make your mortgage money go further is by opting for a Consumers Low-Rate 7-Year Adjusted-Rate Mortgage (ARM.) Continue reading to learn how this type of mortgage could help you save.

An option to consider for those who intend to move within seven years

If you don’t plan to live in one place for very long, a Low-Rate Seven-Year ARM can provide big savings compared to fixed-rate loans. This is because you could get a lower initial interest rate compared to a fixed rate home loan. Lower interest means lower monthly payments and more of your money can go toward principal to help build equity, too.

So why doesn’t everyone get an ARM? While few homebuyers would object to a reduced interest rate, some are uncomfortable with the possibility that their loan’s interest rate could increase. However, the amount an ARM interest rate can vary is limited.

How much can rates vary?

A Low-Rate Seven-Year ARM is a 30-year loan, which allows the interest rate to be adjusted within the first seven years. It has what’s called a 5/2/5 cap. The most the loan’s interest rate could fluctuate over its lifetime is 5 percentage points; those 5 percentage points could happen in year one but if not, future adjustments are limited to a maximum of 2 percentage points per year.

In other words, the rate will never be more than 5 percentage points higher or lower than your initial interest rate.

Homebuyers who choose an ARM should make sure their budget can accommodate a possible increase in rates.

What if I decide to stay in my home after 7 years?

With this 30-year mortgage option, if you decide to stay in your home after the seven-year adjustment period, at the beginning of the eighth year the interest rate will be adjusted according to market rates and a new monthly payment will be calculated for the remainder of the loan repayment period.

To get more details on a Low-Rate Seven-Year ARM home mortgage, including current rates, contact one of our mortgage loan officers or call 800-991-2221.

Consumers helps more than 2,000 members finance land, first and second homes, and home improvement projects each year. We’d love to help you with a mortgage or home equity line of credit; contact us online or call us at 800-991-2221.