Adjustable Rate Mortgage (ARM)

ARMs have an interest rate that changes with market conditions – every one, three, five or seven years depending on the type of ARM you have. Changes in the interest rate can can cause your mortgage payments to either increase or decrease based on the index to which your ARM is tied and the margin established.

To protect you from extreme increases in monthly payments, the ARMs offered at NWFCU have an interest rate "cap" which places a limit on the amount your rate can increase. Caps consist of both annual and lifetime caps. The cap can vary depending upon the ARM program.

Things to remember when considering an ARM

A lower initial interest rate may make an ARM less costly at first than a fixed-rate mortgage for the same loan amount
You may qualify for a larger mortgage amount because of the lower initial rate/monthly payments
It may be less expensive over a long period than a fixed-rate mortgage if the index doesn't fluctuate
An increase in interest rates can lead to higher monthly payments in the future
Cap limit amount increases at each change date