Adjustable Rate Mortgage 

3/1 ARM, 5/1 ARM, 7/1 ARM

These type of loans have the same monthly payment schedule based on a 30 year repayment schedule. The interest rate remains fixed for the first 3, 5, or 7 years depending on chosen term.  After that time (3, 5, or 7 years) the interest rate (the monthly payment) can change year after year; this is called the adjustment period. 

New rate based on changes in financial index and is calculated by adding a specified amount to the index. This amount that is added to the index is called a margin.  There is a lifetime cap that limits how much the rate can go up or down during the life of the loan. 

Ideal if staying in home short term. 

Key Takeaways

• Repayment based on 30 year schedule. 

• Interest rate remains fixed for: 3, 5, or 7 years depending on chosen term.

• Interest rate (monthly payment) can change after (3, 5, or 7 years) 

• New rate based on changes in Financial Index which is calculated by adding specified amount to index. 

• Lifetime cap on loan which limits how much rate can go up or down. 

3/1 ARM 

Interest rate remains the same for the first 3 years. 

5/1 ARM 

Interest rate remains the same for the first 5 years. 

7/1 ARM 

Interest rate remains the same for the first 7 years.