ARM loans are considered to be more risky of an investment. There are a few options that can work to fit your individual needs within various markets.
ARMs that have different indexes are available for refinancing and purchase. To take advantage of falling interest rates, you could purchase an ARM loan that has an index which reacts quickly. On the other hand, if you choose an ARM loan that lags behind, the market will allow you to take advantage of lower rates for a brief time as current market rates are moving upward.
Interest rates and monthly payments with an ARM can be different based on adjustments to the index rate of the loan. There are a few different types of ARM loans. Here are the basics, however, it is encouraged to seek additional assistance before signing for a specific loan.
6 Month Certificate of Deposit (CD) ARM
In this program, the loan has a maximum interest rate adjustment of 1% every six months. These loans can react very fast to movements in the market.
1 Year Treasury Spot ARM
In this program there can be an interest rate adjustment of 2% for every 12 months of the loan. This type of loan can react faster than the Treasury Average index, however, it is slower than the CD index.
6 Month Treasury Average ARM
This loan program typically reacts slower in fluctuating markets so adjustments in the ARM rate will lag behind some other indicators. This program offers an interest trade adjustment of 1% every six months.
1 Year Treasure Average ARM
Similar to the Treasury Spot ARM, this program has a maximum interest trade adjustment of 2% every one year. This type of program typically has a slower reaction in fluctuating markets. This allows for adjustments in the ARM rate to lag behind other indicators.