--- title: Understanding Adjustable Rate Mortgages description: Should you get a mortgage with a fixed rate or an adjustable-rate mortgage or ARM? What benefits can an ARM offer you and why you should consider one. image: https://go.hfcu.org/hubfs/woman%20mortgage.jpg --- [![MoneyWisdom_HFCU_r2](https://go.hfcu.org/hs-fs/hubfs/MoneyWisdom_HFCU_r2.png?width=464&name=MoneyWisdom_HFCU_r2.png "MoneyWisdom_HFCU_r2")](https://go.hfcu.org/blog) Filter by Category** - [Show All](https://go.hfcu.org/blog) - [Security](https://go.hfcu.org/blog/topic/security) - [Personal Finance](https://go.hfcu.org/blog/topic/personal-finance) - [Auto](https://go.hfcu.org/blog/topic/auto) - [Business](https://go.hfcu.org/blog/topic/business) - [Credit Score](https://go.hfcu.org/blog/topic/credit-score) - [Home](https://go.hfcu.org/blog/topic/home) - [Credit Cards](https://go.hfcu.org/blog/topic/credit-cards) - [Life Changes](https://go.hfcu.org/blog/topic/life-changes) - [Insurance](https://go.hfcu.org/blog/topic/insurance) - [Investments](https://go.hfcu.org/blog/topic/investments) Filter by Category** - [Show All](https://go.hfcu.org/blog) - [Security](https://go.hfcu.org/blog/topic/security) - [Personal Finance](https://go.hfcu.org/blog/topic/personal-finance) - [Auto](https://go.hfcu.org/blog/topic/auto) - [Business](https://go.hfcu.org/blog/topic/business) - [Credit Score](https://go.hfcu.org/blog/topic/credit-score) - [Home](https://go.hfcu.org/blog/topic/home) - [Credit Cards](https://go.hfcu.org/blog/topic/credit-cards) - [Life Changes](https://go.hfcu.org/blog/topic/life-changes) - [Insurance](https://go.hfcu.org/blog/topic/insurance) - [Investments](https://go.hfcu.org/blog/topic/investments) ### Posts by Topic - [Personal Finance (262)](https://go.hfcu.org/blog/topic/personal-finance) - [Home (164)](https://go.hfcu.org/blog/topic/home) - [Life Changes (109)](https://go.hfcu.org/blog/topic/life-changes) - [Credit Cards (92)](https://go.hfcu.org/blog/topic/credit-cards) - [Security (74)](https://go.hfcu.org/blog/topic/security) - [Credit Score (69)](https://go.hfcu.org/blog/topic/credit-score) - [Auto (60)](https://go.hfcu.org/blog/topic/auto) - [Checking (54)](https://go.hfcu.org/blog/topic/checking) - [Business (48)](https://go.hfcu.org/blog/topic/business) - [Investments (36)](https://go.hfcu.org/blog/topic/investments) - [Mortgage (32)](https://go.hfcu.org/blog/topic/mortgage) - [Savings (29)](https://go.hfcu.org/blog/topic/savings) - [Scams (29)](https://go.hfcu.org/blog/topic/scams) - [Work (28)](https://go.hfcu.org/blog/topic/work) - [Debt (25)](https://go.hfcu.org/blog/topic/debt) - [Holidays (25)](https://go.hfcu.org/blog/topic/holidays) - [Money Management (22)](https://go.hfcu.org/blog/topic/money-management) - [Hanscom FCU (21)](https://go.hfcu.org/blog/topic/hanscom-fcu) - [Home Ownership (21)](https://go.hfcu.org/blog/topic/home-ownership) - [Credit Report (20)](https://go.hfcu.org/blog/topic/credit-report) - [Government (20)](https://go.hfcu.org/blog/topic/government) - [Home Equity (18)](https://go.hfcu.org/blog/topic/home-equity) - [Budget (17)](https://go.hfcu.org/blog/topic/budget) - [Mobile Banking (17)](https://go.hfcu.org/blog/topic/mobile-banking) - [Investment Property (16)](https://go.hfcu.org/blog/topic/investment-property) - [Saving Money (16)](https://go.hfcu.org/blog/topic/saving-money) - [Insurance (15)](https://go.hfcu.org/blog/topic/insurance) - [Taxes (15)](https://go.hfcu.org/blog/topic/taxes) - [Children (13)](https://go.hfcu.org/blog/topic/children) - [College (11)](https://go.hfcu.org/blog/topic/college) - [Financial Wellness (11)](https://go.hfcu.org/blog/topic/financial-wellness) - [Retirement (11)](https://go.hfcu.org/blog/topic/retirement) - [Community (10)](https://go.hfcu.org/blog/topic/community) - [Online Banking (10)](https://go.hfcu.org/blog/topic/online-banking) - [Estate Planning (8)](https://go.hfcu.org/blog/topic/estate-planning) - [COVID (7)](https://go.hfcu.org/blog/topic/covid) - [Deals (7)](https://go.hfcu.org/blog/topic/deals) - [Death (7)](https://go.hfcu.org/blog/topic/death) - [Shopping (7)](https://go.hfcu.org/blog/topic/shopping) - [Fraud (6)](https://go.hfcu.org/blog/topic/fraud) - [Mass Save (6)](https://go.hfcu.org/blog/topic/mass-save) - [Teens (6)](https://go.hfcu.org/blog/topic/teens) - [Divorce (5)](https://go.hfcu.org/blog/topic/divorce) - [Travel (5)](https://go.hfcu.org/blog/topic/travel) - [ATM (4)](https://go.hfcu.org/blog/topic/atm) - [Baby (4)](https://go.hfcu.org/blog/topic/baby) - [Debit Cards (3)](https://go.hfcu.org/blog/topic/debit-cards) - [Motorcycles (3)](https://go.hfcu.org/blog/topic/motorcycles) - [Weddings (3)](https://go.hfcu.org/blog/topic/weddings) - [Boats (2)](https://go.hfcu.org/blog/topic/boats) - [Charity (2)](https://go.hfcu.org/blog/topic/charity) - [Family Finance (2)](https://go.hfcu.org/blog/topic/family-finance) - [Lending (2)](https://go.hfcu.org/blog/topic/lending) - [Credit Unions (1)](https://go.hfcu.org/blog/topic/credit-unions) - [Green (1)](https://go.hfcu.org/blog/topic/green) - [Medical (1)](https://go.hfcu.org/blog/topic/medical) - [Pets (1)](https://go.hfcu.org/blog/topic/pets) - [dormant account (1)](https://go.hfcu.org/blog/topic/dormant-account) - [inactive account (1)](https://go.hfcu.org/blog/topic/inactive-account) # Understanding Adjustable Rate Mortgages ** [Hanscom Federal Credit Union](https://go.hfcu.org/blog/author/hanscom-federal-credit-union) ** Jun 16, 2022 ![blonde middle aged woman on bed looking at mortgage rates on tablet](https://go.hfcu.org/hubfs/woman%20mortgage.jpg) Deciding among mortgage products and the rates associated with each can be overwhelming for home buyers. On a list of mortgage rates, you're going to see loan rates for both fixed-rate mortgages as well as [adjustable-rate mortgages](https://go.hfcu.org/blog/four-things-every-homebuyer-needs-to-know-about-adjustable-rate-mortgages-arms), commonly referred to as ARMs. In this blog we're going to explain ARMs so that you can make the best financial decision for your needs. Here's what you need to know: - An ARM has a fixed rate for the first several years of the loan term and is typically lower than any comparable rate you can get for a fixed-rate mortgage. At Hanscom Federal Credit Union, these initial rates may be fixed for 5, 7, or 10 years. - Once the fixed-rate portion of the term is over, the ARM adjusts up or down based on current market rates. The rates are subject to caps that govern how much they can go up in any particular adjustment period. At Hanscom FCU, our ARM adjustments happen once per year. - When the rate adjusts, the new rate is calculated by adding an index number to a margin specified in your mortgage documentation. Historically and typically, these adjustments follow the market rates.   Here is an example of the First Time Homebuyer Helper (HLPR) 7/1 ARM offered by Hanscom FCU: **![HLPR 7_1 ARM](https://go.hfcu.org/hs-fs/hubfs/HLPR%207_1%20ARM.jpg?width=440&name=HLPR%207_1%20ARM.jpg)** Now we'll break down the numbers for you in this example: a 7/1 ARM that starts with a fixed rate of 3.75%, caps of 1/1/5, a margin of 2.75%, an index tied to the one-year U.S. CMT (Constant Maturity Treasury) rate, and a floor of 2.75%, meaning it will never go below 2.75%. For the first seven years, the payments will be based on the 3.75% interest rate and then after seven years, the rate will change every year based on the CMT rate. - **Year 1 through Year 7** = 3.75% - **Year 8** (max decrease to 2.75% or max increase to 4.75%) - **Year 9** (max decrease to 2.75% or max increase to 5.75%) - **Year 10 - Year 30** (follow change based on prior year's rates. Rate cannot exceed 8.75%)   ### **The Benefits of ARMs** - Lower rates mean a lower payment, so an ARM is easier on your wallet - Qualify for a larger loan amount = bigger purchase amount - Could be less expensive over the long term than a fixed rate if interest rates remain steady or drop - Could be good for those who plan to be in the home for only a few years ### **The Drawbacks of Arms** - An increase in interest rates would lead to higher monthly payments in the future   ### **Is an ARM Right for You?** Ask yourself these questions when you're trying to decide between a fixed-rate mortgage and an ARM: - Is my income enough—or likely to rise enough—to cover higher mortgage payments with an ARM if interest rates go up? - Will I be taking on other sizable debts, such as a loan for a car or school tuition, in the near future? - How long do I plan to own this home? (If you plan to sell soon, rising interest rates may not pose the problem they do if you plan to own the house for a long time.) ### **Not All ARMs Are Created Equally** Other lenders may offer products where the rates change every six months, offer an option to pay interest only as part of your ARM offering, have much higher interest rate caps, or have prepayment penalties for paying off an ARM during the introductory period. This is why it is important to discuss the terms of the ARM with your loan officer. At Hanscom FCU, we want to make sure you are properly educated on the loan product you choose. Since Hanscom FCU does not have any prepayment penalties, you can apply to refinance your ARM at any point in time, providing you have equity to do so. Most people will look to refinance their mortgage once it comes close to the adjustment period, or they may have already sold that home to move into a new home. Alternatively, depending on where rates are at the time and how much your rate is scheduled to adjust, you may be comfortable continuing with the ARM, especially if your interest rate hasn't changed that much. It’s important to [understand the full terms of the loan](https://go.hfcu.org/blog/how-to-prepare-for-home-ownership) to determine if it is the right option for you. At the time of this writing, ARMs have a significantly lower rate than fixed-rate mortgages, so it could be a good option for many of our members. Be sure to take the time to contact one of our expert loan officers, [Liz Clarke](mailto:eclarke@hfcu.org) at 781-382-5064 or [Scott Barry](mailto:sbarry@hfcu.org) at 781-382-8455 to help determine the best option for you.*   [![New call-to-action](https://no-cache.hubspot.com/cta/default/118438/85c7467a-5b25-466d-8bf8-454f68ccce39.png)](https://cta-redirect.hubspot.com/cta/redirect/118438/85c7467a-5b25-466d-8bf8-454f68ccce39)   *This blog was jointly written by Liz Clarke, NMLS #881030 and Scott Barry, NMLS #1210010 *Others are reading:* - [Say Hello to a HELOC](https://go.hfcu.org/blog/bid/183160/say-hello-to-a-heloc) - [How to Make Bi-weekly Mortgage Payments to Save Money](https://go.hfcu.org/blog/how-to-make-biweekly-mortgage-payments-to-save-money) - [3 Tips to Boost Your Credit Score Quickly](https://go.hfcu.org/blog/3-tricks-to-boost-your-credit-score) - [5 Tips to Win a Bidding War on a New Home](https://go.hfcu.org/blog/win-a-bidding-war-on-house) - [3 Tools You'll Need for a Problem-free Home Purchase](https://go.hfcu.org/blog/home-sweet-home-3-tools-disclose-issues-for-home-buyers) ** [Home](https://go.hfcu.org/blog/topic/home), [Mortgage](https://go.hfcu.org/blog/topic/mortgage) [** Stage Your House to Sell ](https://go.hfcu.org/blog/stage-your-house-to-sell) [** How to Help a Victim of Identity Theft ](https://go.hfcu.org/blog/how-to-protect-your-loved-ones-from-identity-theft) ### About Author ![Hanscom Federal Credit Union](https://go.hfcu.org/hubfs/HFCU-Profile-1000x1000.jpg) Hanscom Federal Credit Union Hanscom Federal Credit Union, a purpose-driven $1.9 billion organization based in Littleton, MA, empowers its members to achieve financial wellness. Hanscom FCU serves over 95,000 members across the country and overseas through 16 branches, over 100,000 surcharge-free ATMs, 5,000 contact centers, and a web-based branch. Related Posts [![Your First Step in Buying a Home: Pre-Approved for a Mortgage](https://go.hfcu.org/hubfs/Untitled%20design%20(85).jpg) Your First Step in Buying a Home: Pre-Approved for a Mortgage ](https://go.hfcu.org/blog/bid/172300/the-mortgage-application-process-get-pre-approved-before-you-look) [![How to Buy a Home With No Money Down](https://go.hfcu.org/hubfs/Canva%20images/Canva%20Design%20DAFi0NubHVw.png) How to Buy a Home With No Money Down ](https://go.hfcu.org/blog/how-to-buy-a-home-with-no-money-down) [![HELOC vs. Cash-Out Refinancing: What's the Difference?](https://go.hfcu.org/hubfs/FAMILY%20doing%20home%20renovation.png) HELOC vs. Cash-Out Refinancing: What's the Difference? ](https://go.hfcu.org/blog/heloc-vs.-cash-out-refinancing-whats-the-difference) ** - [**](http://www.facebook.com/share.php?u=https://go.hfcu.org/blog/understanding-adjustable-rate-mortgages/) - [**](https://X.com/share?url=https://go.hfcu.org/blog/understanding-adjustable-rate-mortgages/) - [**](http://www.linkedin.com/shareArticle?mini=true&url=https://go.hfcu.org/blog/understanding-adjustable-rate-mortgages/&summary=&source=CeBIT) ## You are Leaving Hanscom Federal Credit Union #### **Please read the following before proceeding to:** The website you are about to visit is solely the responsibility of the merchant or other party providing the site. The content of this third-party site, including materials and information, is solely the responsibility of the provider of the site. The Credit Union is not responsible for any such third-party content. Any transactions that you enter into with a vendor, merchant or other party that you access through this third-party site are solely between you and that vendor, merchant or other party. The Credit Union does not endorse the content contained in this third-party site, nor the organization publishing the site, and hereby disclaims any responsibility for such content. The Credit Union Privacy Policy does not apply to this third-party site, and for further information you should consult the privacy disclosures of the third-party site. ### Comment ### Subscribe To Blog ### Subscribe to Email Updates ### contact **Hanscom Federal Credit Union** 1610 Eglin St. Hanscom AFB, MA 01731 Call us: [800-656-4328](tel:8006564328) [https://www.hfcu.org/](https://www.hfcu.org/) ### About Us [The MoneyWisdom Blog](https://www.hfcu.org/the-moneywisdom-blog.html) ### Social ** ## You are Leaving Hanscom Federal Credit Union #### **Please read the following before proceeding to:** ### https://www.facebook.com/HanscomFederalCreditUnion The website you are about to visit is solely the responsibility of the merchant or other party providing the site. The content of this third-party site, including materials and information, is solely the responsibility of the provider of the site. The Credit Union is not responsible for any such third-party content. Any transactions that you enter into with a vendor, merchant or other party that you access through this third-party site are solely between you and that vendor, merchant or other party. The Credit Union does not endorse the content contained in this third-party site, nor the organization publishing the site, and hereby disclaims any responsibility for such content. The Credit Union Privacy Policy does not apply to this third-party site, and for further information you should consult the privacy disclosures of the third-party site. ## You are Leaving Hanscom Federal Credit Union #### **Please read the following before proceeding to:** ### https://X.com/HanscomFCU The website you are about to visit is solely the responsibility of the merchant or other party providing the site. The content of this third-party site, including materials and information, is solely the responsibility of the provider of the site. The Credit Union is not responsible for any such third-party content. Any transactions that you enter into with a vendor, merchant or other party that you access through this third-party site are solely between you and that vendor, merchant or other party. The Credit Union does not endorse the content contained in this third-party site, nor the organization publishing the site, and hereby disclaims any responsibility for such content. The Credit Union Privacy Policy does not apply to this third-party site, and for further information you should consult the privacy disclosures of the third-party site. ## You are Leaving Hanscom Federal Credit Union #### **Please read the following before proceeding to:** ### https://www.instagram.com/hanscomfcu/ The website you are about to visit is solely the responsibility of the merchant or other party providing the site. The content of this third-party site, including materials and information, is solely the responsibility of the provider of the site. The Credit Union is not responsible for any such third-party content. Any transactions that you enter into with a vendor, merchant or other party that you access through this third-party site are solely between you and that vendor, merchant or other party. The Credit Union does not endorse the content contained in this third-party site, nor the organization publishing the site, and hereby disclaims any responsibility for such content. The Credit Union Privacy Policy does not apply to this third-party site, and for further information you should consult the privacy disclosures of the third-party site. ## You are Leaving Hanscom Federal Credit Union #### **Please read the following before proceeding to:** ### https://www.linkedin.com/company/hanscomfcu/ The website you are about to visit is solely the responsibility of the merchant or other party providing the site. The content of this third-party site, including materials and information, is solely the responsibility of the provider of the site. The Credit Union is not responsible for any such third-party content. Any transactions that you enter into with a vendor, merchant or other party that you access through this third-party site are solely between you and that vendor, merchant or other party. The Credit Union does not endorse the content contained in this third-party site, nor the organization publishing the site, and hereby disclaims any responsibility for such content. The Credit Union Privacy Policy does not apply to this third-party site, and for further information you should consult the privacy disclosures of the third-party site. ## You are Leaving Hanscom Federal Credit Union #### **Please read the following before proceeding to:** ### http://www.youtube.com/c/HanscomFederalCreditUnion The website you are about to visit is solely the responsibility of the merchant or other party providing the site. The content of this third-party site, including materials and information, is solely the responsibility of the provider of the site. The Credit Union is not responsible for any such third-party content. Any transactions that you enter into with a vendor, merchant or other party that you access through this third-party site are solely between you and that vendor, merchant or other party. The Credit Union does not endorse the content contained in this third-party site, nor the organization publishing the site, and hereby disclaims any responsibility for such content. The Credit Union Privacy Policy does not apply to this third-party site, and for further information you should consult the privacy disclosures of the third-party site. ### Popular Posts [What You Need to Know About Putting Your Home in a Trust](https://go.hfcu.org/blog/what-you-need-to-know-about-putting-your-home-in-a-trust) ![older man looking at top retirement worry on digital device](https://go.hfcu.org/hubfs/Untitled%20design%20-%202022-02-10T072804.753.jpg) [What You Need to Know About Your Federal Tax Bracket](https://go.hfcu.org/blog/what-you-need-to-know-about-your-tax-bracket) ![older man looking at top retirement worry on digital device](https://go.hfcu.org/hubfs/Untitled%20design%20-%202021-03-22T123305.900.jpg) [6 Boat Types to Get on the Water](https://go.hfcu.org/blog/6-boat-types-to-get-on-the-water) ![older man looking at top retirement worry on digital device](https://go.hfcu.org/hubfs/images/Jet_Ski.jpg) [23 Organizations Dedicated to the Needs of Seniors](https://go.hfcu.org/blog/23-organizations-dedicated-to-the-needs-of-seniors) ![older man looking at top retirement worry on digital device](https://go.hfcu.org/hubfs/Senior%20citizens.jpg) [9 Smart Moves for Lottery Winners](https://go.hfcu.org/blog/lottery) ![older man looking at top retirement worry on digital device](https://go.hfcu.org/hubfs/images/lottery_winner.jpg) ### Recent Posts - [![National Credit Union Administration](https://go.hfcu.org/hs-fs/hubfs/NCUA-logo-small.png?width=95&name=NCUA-logo-small.png) ](https://www.ncua.gov/) [![Equal Housing Lender](https://go.hfcu.org/hs-fs/hubfs/EHL-logo-small.png?width=65&name=EHL-logo-small.png)](https://www.hud.gov/fairhousing) - @ 2023 [Hanscom Federal Credit Union](https://www.hfcu.org/) - Federally insured by the National Credit Union Administration. - [Privacy Policy](https://www.hfcu.org/content/docs/Privacy_Notice.pdf) **Disclosure:** Hanscom Federal Credit Union does not provide and is not responsible for any products, services, or overall website content available at any third-party sites linked within this blog. Moreover, Hanscom Federal Credit Union's privacy policies do not apply to any of the linked websites within this blog. Please consult the privacy disclosures on those linked sites for further information. ```json { "@context" : "http://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "Hanscom Federal Credit Union" }, "dateModified" : "June 16, 2022, 2:01:35 PM", "datePublished" : "2022-06-16 13:30:00", "description" : "Should you get a mortgage with a fixed rate or an adjustable-rate mortgage or ARM? What benefits can an ARM offer you and why you should consider one.", "headline" : "Understanding Adjustable Rate Mortgages", "image" : { "@type" : "ImageObject", "url" : "https://118438.fs1.hubspotusercontent-na1.net/hubfs/118438/woman%20mortgage.jpg" }, "mainEntityOfPage" : { "@id" : "https://go.hfcu.org/blog/understanding-adjustable-rate-mortgages", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://cdn2.hubspot.net/hubfs/118438/Logo%202.jpg" }, "name" : "Hanscom Federal Credit Union" } } ```