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Adjustable Rate Mortgage (ARM) Loans

There are numerous options when buying a home; we take the time to tailor fit a plan that is best for you. One option is an Adjustable Rate Mortgage. An ARM can provide greater buying power and lower monthly payments up front. But after a pre-set period, the interest rate can adjust annually.

Summary

Lower initial interest rates, lower monthly payments initially
ARMs available with initial period from one to seven years
Re-pricing will occur once per year after initial term
Quick decision-making
Local service throughout life of loan
Home Federal ARMs are fully amortizing with NO negative amortization

Why Choose an ARM?

The initial interest rate is always lower with an ARM over a fixed rate mortgage. This is an obvious advantage. But many people wonder, "Why choose an ARM if I know the rate will keep increasing?" Good question. It's not for everyone, but an ARM could be perfect if:

You plan on selling the house in 5-10 years
You expect your salary and income to increase within a few years
The ARM has the option to convert to a fixed rate (this will often cost a fee that cancels out the initial savings from lower payments, but could be a favorable option to help get into the home and pay to refinance later)

A note about negative amortization:

Negative amortization occurs when a payment cap is set too low. Paying less sounds enticing, but if your monthly payments aren't enough to cover interest, that interest is added back to the loan amount. The result is you keep making payments, but the loan debt increases. Home Federal Bank NEVER offers a loan that will cause negative amortization.