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Adjustable-Rate Mortgages

When is it right for you?

In the right circumstances, an adjustable-rate mortgage (ARM) can be a great choice. There are a lot of misconceptions about ARMs that lead people to shy away from them. With an adjustable-rate mortgage, the rate stays the same for the first few years, usually five or seven. After that initial period, your mortgage converts to a variable rate that may go up according to changes in the underlying financial index.

Your Avadian mortgage will adjust on the anniversary date every year. It can adjust only one time per year and can only adjust by a certain percentage. The details are spelled out in your mortgage agreement, so you'll know what to expect as your rate changes. 

The Pros

  • The initial interest rate is usually lower than on a comparable fixed-rate mortgage
  • Lower monthly payment for the fixed period of the mortgage

The Cons

  • After the fixed-rate period ends, the rate could adjust up, meaning your monthly payments would increase
  • Interest rates are unpredictable, so you can't predict what your payments will be in the future

Is an ARM Right for Me?

An ARM is great for homeowners who don't plan to stay in their home for a long period of time. If your fixed-rate period is less than the time you plan to live in the house, your interest rate would never change. So if you move around a lot, are a first-time homeowner who expects to upgrade in the near future, or are in the business of flipping houses and planning to sell the house as soon as renovations are complete, you might benefit from an ARM.

The credit union is federally insured by the National Credit Union Administration.
Additional insurance of up to $250,000 on your savings accounts is provided by Excess Share Insurance Corporation, a licensed insurance company.

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