Adjustable Rate Mortgage
Lower initial rates with flexibility built in. An ARM adapts as your needs change.
An adjustable rate mortgage starts with a lower introductory rate that remains fixed for a set period, typically 3 to 10 years. After that initial period, the rate adjusts periodically based on market conditions. An ARM can be a smart choice if you plan to sell or refinance before the rate adjusts, or if you expect your income to increase. The lower initial rate means lower payments when you need them most, giving you more financial flexibility in the early years of homeownership.
Understanding adjustable rate mortgages
Learn how an ARM works and whether this flexible mortgage option fits your financial plan.
How does the interest rate change on an ARM?
An ARM has a fixed rate period, usually 3, 5, 7, or 10 years. During this time, your rate and payment stay the same. After the fixed period ends, the rate adjusts periodically, typically once per year or every six months, based on market conditions and the terms of your loan. Each adjustment is calculated using a specific index plus a margin set by the lender, with caps that limit how much your rate can increase per adjustment and over the life of the loan.
What are caps on an ARM?
Caps limit how much your interest rate can increase. There are three types of caps: the periodic cap limits how much the rate can increase at each adjustment, the lifetime cap limits the total increase over the life of the loan, and the initial cap applies to the first adjustment. These protections help you understand the maximum your payment could increase and plan accordingly.
Who should consider an ARM?
An ARM works well if you plan to sell or refinance within the fixed rate period, or if you expect your financial situation to improve significantly. It's also an option if you're comfortable with some payment uncertainty later and want to take advantage of lower initial rates. An ARM may not be right if you plan to stay in your home long-term and prefer complete payment predictability.
What happens when my ARM adjusts?
When your ARM adjusts, your interest rate and monthly payment change based on market conditions and the terms of your loan. The adjustment is calculated using a specified index, the lender's margin, and any caps that apply. You'll receive notice of the adjustment before it takes effect, giving you time to prepare for the new payment amount.
Adjustable rate mortgage options
Explore our ARM options with different fixed rate periods. Your actual rate depends on your financial profile, loan amount, down payment, and current market conditions. Let us help you find the ARM structure that works for your situation.
Rates as of
| Loan type | Rate | APR |
|---|---|---|
| 3/1 ARM Fixed rate for 3 years, then adjusts annually | 6.500% | 6.625% |
| 7/1 ARM Fixed rate for 7 years, then adjusts annually | 5.750% | 5.900% |
| 10/1 ARM Fixed rate for 10 years, then adjusts annually | 6.250% | 7.125% |
APR calculations assume a loan amount of 80% of home value, standard closing costs, and adjustments based on typical market indices. Your actual rate and APR will reflect your specific situation and loan terms.
These rates are provided as examples only and are not an offer to lend. Actual rates depend on your credit score, debt-to-income ratio, loan-to-value ratio, property type, occupancy status, and market conditions at application. All ARM products are subject to rate adjustment caps and other terms as disclosed in your loan documents. Boise Basin Home Loans reserves the right to change, withdraw, or modify these rates at any time without notice. Rate adjustment schedules, indices, and caps vary by product. Contact us for complete details and a personalized quote.
How an ARM works
Your rate adapts over time
An ARM gives you a predictable initial period with a lower rate, followed by periodic adjustments. This structure works well for borrowers who want immediate payment relief or plan to move or refinance before adjustments begin. During your fixed rate period, your payment stays the same. Once adjustments start, your payment may increase or decrease based on market conditions, but rate caps protect you from dramatic increases. Understanding your specific adjustment schedule and caps helps you plan ahead and make confident decisions about your mortgage.