If you’ve heard the term “ARM” loan but weren’t quite sure what it meant, we’re here to help. First, we should understand the different types of loans.
What is a fixed rate mortgage?
A fixed rate mortgage is a loan with a set interest rate for the entire term of the loan. The interest rate will not change over the lifetime of the loan and your interest and principal payments will remain the same each month.
What is an adjustable rate mortgage (ARM)?
ARM stands for “adjustable rate mortgage.” With an ARM loan, your interest rate and monthly payment can increase or decrease over time based on the market. ARMs can have initial interest rates that are lower than fixed rate mortgages.
What’s the difference between an ARM and a variable rate mortgage?
The key difference between ARMs and variable rate mortgages is that the interest rates for variable rate mortgages is never fixed so your payment can fluctuate every month from the onset of your loan. Whereas ARMs include an initial fixed period followed by a variable rate that resets periodically.
Can I switch from an ARM or variable rate mortgage to a fixed rate?
Yes. No matter what type of loan you have, Rural 1st offers you the ability to convert your loan through our Conversion Program annually (or every 12 months) for a $500 conversion fee.* Conversions do not require refinancing and are a great option for those looking to modify their loan terms and save money.
To learn more about ARMs, variable rate loans and more, contact our team of experts.
*Provided that eligibility requirements are met. Conversion has a one-time fee of $500.00. Terms and Conditions may apply. The fee is subject to change without notice.