By Marc Starr, NMLS# 230875, Supreme Lending and Member of CCAR’s REALTOR® & Lender Committee
"Today's ARM [Adjustable Rate Mortgage] is not your father's ARM, and is worthy of being considered. Especially for people who plan on moving or paying off the loan before it resets" -Marc Starr
Conventional and Jumbo Options:
5/6 ARM – Rate is fixed for the first 5 years and usually around .75% lower than 30 year fixed.
7/6 ARM – Rate is fixed for the first 7 years and usually around .50% lower than 30 year fixed.
10/6 ARM – Rate is fixed for the first 10 years and usually around .25% lower than 30 year fixed.
Rate becomes adjustable after the fixed period and can adjust higher or lower at adjustment phases every six months.
Index is the SOFR (Secured Overnight Financing Rate)
Government Loan and Some Jumbo Options:
The rate becomes adjustable annually after the fixed period ends.
Index is CMT (One Year Treasury Constant Maturity)
Since most lenders offer multiple ARM options involving various margins that affect rate adjustments, it’s always best to have a thorough analysis with the borrower to help them determine which is the best option to accomplish their specific mortgage goals. For more information on this or other lending related topics, please contact any member of CCAR's REALTOR® & Lender Committee at RealtorLender@ccar.net.