Curious about a Flex Adjustable Rate Mortgage? GPO has you Covered!
05/30/2024
Picture this: you’re on the hunt for your dream home, and you want a mortgage that fits your financial goals like a glove. That’s where GPO’s Flex Adjustable-Rate Mortgage (ARM) comes into play. Unlike a fixed-rate mortgage where the interest rate stays the same throughout the loan term, an ARM has an interest rate that can change over time.
Who is the ideal candidate for GPO’s ARM product?
In this rising rate environment, flexibility is key! The Flex ARM offers a low interest rate for a fixed period of time, resulting in a more affordable payment.
7/1 ARM
- Fixed rate for the first 7 years
- Rate is 1.25% below 30-year rate
- 30 Year Repayment Term
10/1 ARM
- Fixed rate for the first 10 years
- Rate is 1.00% below 30-year rate
- 30 Year Repayment Term
You may be wondering: “Why would I want my rate to change?” ARMs typically start with a fixed rate for a certain period, like 7 or 10 years. This initial period is referred to as the “fixed-rate period,” and it can give you a lower interest rate compared to traditional fixed-rate mortgage.
After the fixed-rate period ends, the interest rate on an ARM can adjust periodically based on changes in a specific financial index, like the U.S. Treasury Bill rate. This means that your monthly mortgage payment can go up or down depending on how the index is fluctuating.
Understanding how an ARM product works:
The key to understanding ARMs is knowing how the adjustments work. Most ARMs have a “cap” or a limit on how much the interest rate can change during each adjustment period and over the life of the loan. The cap provides some peace of mind, so you won’t be hit with a sudden and drastic increase in your monthly payment.
An advantage of an ARM is that if interest rates in the market decrease, your monthly payment could also go down. This can be beneficial if you plan to sell the home or refinance before the fixed-rate period ends.
However, it’s important to consider the potential risks of an ARM. Since your interest rate can adjust, your monthly payment could increase, which may put a strain on your budget. It’s crucial to carefully evaluate your financial situation and future plans before choosing an ARM.
When it comes to the home loan application process, the requirements for a Flex ARM are similar to those for a fixed-rate mortgage. Lenders will consider factors such as your credit score, income, employment history, debt-to-income ratio, and the amount of your down payment.
It is always a good idea to consult with a mortgage originator who can provide personalized advice based on your specific needs and goals. Here at GPO, as your Home Lending Headquarters, we are here to answer any questions and help with every step along the way!