An adjustable-rate mortgage (ARM) has an interest rate that changes — usually once a year — according to changing market conditions.A changing interest rate affects the size of your monthly mortgage payment. ARMs are attractive to borrowers because the initial rate for most is significantly lower than a conventional 30-year fixed-rate mortgage.

One of those areas I was bound to improve was with the mortgage process. My first mortgage was a lovely thing called a five-year ARM (Adjustable Rate Mortgage. packing my lunch for work more often,

The 30-year fixed mortgage carries a monthly payment of $943 per month, while the ARM carries a payment of about $865. The smart thing to do might be to take out a 5/1 ARM but make monthly.

Adjustable Rate Mortgages Defined An ARM, short for "adjustable rate mortgage", is a mortgage on which the interest rate is not fixed for the entire life of the loan. The rate is fixed for a period at the beginning, called the "initial rate period", but after that it may change based on movements in an interest rate index.

The initial interest rates for adjustable rate mortgages are normally lower than a fixed rate mortgage, which in turn means your monthly payment is lower. If you only plan to stay in your home for a short period of time, an ARM loan might be advantageous to you because you plan on moving or selling your home before your initial mortgage rate.

Arm Rates Mortgage 5-Year ARM Mortgage Rates. A five year mortgage, sometimes called a 5/1 ARM, is designed to give you the stability of fixed payments during the first 5 years of the loan, but also allows you to qualify at and pay at a lower rate of interest for the first five years.

This differs from a fixed-rate mortgage, where the interest rate stays constant over the life of a mortgage. With a 5/1 ARM, the interest rate does not begin changing based on the index immediately. Instead, the interest rate on a 5 year ARM is fixed for the first five years of the loan.

Adjustable Rate Mortgage Margin The Hybrid ARM Is Back – And It’s A Smart, Customizable Mortgage Option – Some smart guy in some small bank somewhere had an idea for a better mousetrap and the Hybrid ARM was born. part fixed, part adjustable with an initial “teaser” rate far below 30-year fixed rates, the.

An adjustable rate mortgage (ARM) is a mortgage with an interest rate that reflects the market, causing it to change over time rather than remaining constant like with a fixed-rate mortgage. However, there is often a period of time at the beginning of an ARM during which it has a fixed rate.

Typically, an adjustable-rate mortgage will offer an initial rate, or teaser rate, for a certain period of time, whether it’s the first year, three years, five years, or longer. After that initial period ends, the ARM will adjust to its fully-indexed rate, which is calculated by adding the margin to the index.