A lower ARM Rate could open the door to home ownership
For some, an Adjustable-Rate Mortgage (ARM) can be a viable option in today’s economic situation. If you’re ready for home ownership but want to start with a lower interest rate and, therefore, a lower monthly payment, an ARM from TEGFCU may be a way to maximize your buying power.
This loan is great for members who want their specific situations to be considered. For example, if you own a home and want to refinance your loan, knowing you’ll be transferred in 5 years, a 5/6 ARM loan might be a great option. You’ll pay lower for the first 5 years of a 5/6 ARM loan than if you refinance with a fixed-rate loan.
ARMs can be complex, so it is a good idea to work closely with a mortgage specialist to understand all the terms and conditions that can impact your payment now and in the future.
What is an ARM?
Adjustable-Rate Mortgages (ARMs) are home loans where the interest rate and loan payments could change over time. The initial interest rate is fixed for a set period of time, typically 3-10 years, after which the interest rate my adjust periodically based on market changes to the index plus a margin. The margin remains constant throughout the life of your loan. Interest rate changes are further limited by loan caps which limit the amount your rate can increase or decrease at the first and subsequent rate changes, as well as over the life of your loan. When the interest rate changes, your payment will change so the remaining balance will amortize over the remaining term of your loan.
TEG offers ARMs with an initial fixed term of 5 or 7 years, after which your rate may change every six months (bi-annually). At adjustment, the new rate is determined by the Secured Overnight Financing Rate (SOFR) index plus a fixed margin of 2.25% with maximum periodic rate changes limited by the loan caps. When interest rates go up, your monthly mortgage payment may increase, but when interest rates go down, your monthly mortgage payments may decrease. Th risk of higher interest when rates adjust is a crucial factor for a borrower considering an Adjustable-Rate Mortgage.
An Adjustable-Rate Mortgage consists of two
numbers when advertised (i.e. 7/6 ARM):
An Adjustable-Rate Mortgage is best
for those who:
Adjustable-Rate Mortgage (ARM) Rates
| Mortgage Type | Rate | APR | Points | First Cap | Subsequent Cap | Lifetime Cap |
|---|---|---|---|---|---|---|
| 5/6 SOFR ARM | 6.000% | 6.738% | 0.875% | +/- 2.00% | +/- 1.00% | +/- 5.00% |
| 7/6 SOFR ARM | 6.250% | 6.748% | 0.875% | +/- 5.00% | +/- 1.00% | +/- 5.00% |
APR = Annual Percentage Rate. Rates effective as of 11/20/2024. All loans are subject to approval. APR assumes a $300,000 loan amount with a FICO score of 760 or higher for a loan for an owner-occupied (primary residence), single-family dwelling in New York State with a loan-to-value ratio of 75% or less. Rates on 5/6 ARMs are fixed for the first five years and subsequently subject to change bi-annually. Rates on 7/6 ARMS are fixed for the first seven years and subsequently subject to change bi-annually.
For example, a 5/6 ARM at a fixed initial interest APR of 6.738%, would initially be $2,201.29 or a 7/6 ARM at a fixed initial interest APR of 6.748%, would initially be $1,847.15. Real estate taxes, insurance, and private mortgage insurance (if applicable) are not included; therefore, the actual payment obligation will be greater. After the initial fixed term, rates will adjust based on the index, Secured Overnight Financing Rate (SOFR), and a margin, not to exceed the initial, subsequent or lifetime change cap. Your rate may vary based on your creditworthiness, loan amount, purpose, LTV, lock period, and other credit characteristics.
All rates and terms are subject to change without notice. No rate is guaranteed without a valid rate lock. A point is equal to 1% of the loan amount’s balance. Private mortgage insurance (PMI) is required on mortgages that exceed 80% loan-to-value (LTV). Contact a TEG Mortgage Officer for further details. Other terms and conditions may apply.
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Jeffrey Shields
Mortgage Officer
NMLS# 1466211
Jessica Schoen
Senior Mortgage Officer
NMLS# 22486
Matthew Bannan
SENIOR MORTGAGE OFFICER
NMLS# 404022
Scott McNally
Mortgage Officer
NMLS# 1841508
Darren Dibenedetto
Senior Mortgage Officer
NMLS# 404038Homebuying Questions?
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