{"id":2675,"date":"2024-07-12T11:32:58","date_gmt":"2024-07-12T15:32:58","guid":{"rendered":"https:\/\/wp-dcb.resultspw.com\/?page_id=2675"},"modified":"2024-12-02T10:03:15","modified_gmt":"2024-12-02T15:03:15","slug":"arm-faqs","status":"publish","type":"page","link":"https:\/\/www.deanbank.com\/lending\/arm-faqs\/","title":{"rendered":"ARM FAQs"},"content":{"rendered":" <div class=\"page-header-simple section-bg-blue \"> <div class=\"container\"> <nav id=\"breadcrumb\" class=\"breadcrumb\" aria-label=\"Breadcrumb\"><span><span><a href=\"https:\/\/www.deanbank.com\/\">Home<\/a><\/span><\/span><\/nav> <h1 class=\"title\">FAQs<\/h1> <\/div><\/div>\n\n\n<div class=\"wp-block-columns is-layout-flex wp-container-core-columns-is-layout-9d6595d7 wp-block-columns-is-layout-flex\">\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:66.66%\"> <div class=\"mod-faq-container\"><h2 class=\"title\">ARM FAQ<\/h2> <ol class=\"mod_faq_questions\"> <li><a name=\"question_1291\"><\/a><button class=\"question js-accordion-title\" tabindex=\"0\" aria-expanded=\"false\" aria-controls=\"ac_1291\" id=\"ach_1291\"><p>What is the difference between a fixed-rate and adjustable-rate mortgage?<\/p><\/button><div class=\"answer js-accordion-content\" id=\"ac_1291\" aria-labelledby=\"ach_1291\" role=\"region\" style=\"display: none;\"><p>With a fixed-rate mortgage, the interest rate, your monthly principal and interest payment stay the same throughout the life of your loan. With an adjustable-rate mortgage (ARM), the interest rate changes periodically, and your payments may go up or down.<\/p>\n<\/div><\/li><li><a name=\"question_1292\"><\/a><button class=\"question js-accordion-title\" tabindex=\"0\" aria-expanded=\"false\" aria-controls=\"ac_1292\" id=\"ach_1292\"><p>How do ARMs work?<\/p><\/button><div class=\"answer js-accordion-content\" id=\"ac_1292\" aria-labelledby=\"ach_1292\" role=\"region\" style=\"display: none;\"><p>ARMs have two distinct periods:<\/p>\n<ul>\n<li><strong>Initial period:<\/strong> Also known as the fixed-rate period. During this time, the interest rate on your loan doesn\u2019t change. The initial period can range from six months to 10 years. The most common ARM terms will have an initial period of 3, 5, or 10 years.<\/li>\n<li><strong>Adjustment period:<\/strong> All ARMs have adjustment periods that determine when and how often the interest rate can change. Your adjusted rate will be based on your individual loan terms and the current market.<\/li>\n<\/ul>\n<\/div><\/li><li><a name=\"question_1293\"><\/a><button class=\"question js-accordion-title\" tabindex=\"0\" aria-expanded=\"false\" aria-controls=\"ac_1293\" id=\"ach_1293\"><p>What are the different types of ARMs?<\/p><\/button><div class=\"answer js-accordion-content\" id=\"ac_1293\" aria-labelledby=\"ach_1293\" role=\"region\" style=\"display: none;\"><p>There are different types of ARMs.<\/p>\n<ul>\n<li>The name of the ARM will indicate the duration of the initial period<\/li>\n<li>How often in a year your rate can adjust during the adjustment period<\/li>\n<\/ul>\n<p>For example, let\u2019s look at a 5\/1 ARM. The initial period is five years (the 5), during which the interest rate doesn\u2019t change. After that time, you can expect your ARM to adjust once a year (the 1).<\/p>\n<p>Most ARMs also typically offer a rate cap structure, which is meant to limit how much your rate can increase or decrease. There are three different caps:<\/p>\n<ul>\n<li><strong>Initial cap:<\/strong> Limits how much your rate can increase when your rate first adjusts<\/li>\n<li><strong>Periodic cap:<\/strong> Limits how much your rate can increase from one adjustment period to the next<\/li>\n<li><strong>Lifetime cap:<\/strong> Limits how much your rate can increase or decrease over the life of the loan<\/li>\n<\/ul>\n<\/div><\/li><li><a name=\"question_1294\"><\/a><button class=\"question js-accordion-title\" tabindex=\"0\" aria-expanded=\"false\" aria-controls=\"ac_1294\" id=\"ach_1294\"><p>Is an ARM loan the same as a variable-rate mortgage?<\/p><\/button><div class=\"answer js-accordion-content\" id=\"ac_1294\" aria-labelledby=\"ach_1294\" role=\"region\" style=\"display: none;\"><p>Yes. The terms ARM (adjustable-rate mortgage) and variable-rate mortgage both refer to the type of loan where the interest rate changes periodically.<\/p>\n<\/div><\/li><li><a name=\"question_1295\"><\/a><button class=\"question js-accordion-title\" tabindex=\"0\" aria-expanded=\"false\" aria-controls=\"ac_1295\" id=\"ach_1295\"><p>How is the interest rate calculated?<\/p><\/button><div class=\"answer js-accordion-content\" id=\"ac_1295\" aria-labelledby=\"ach_1295\" role=\"region\" style=\"display: none;\"><p>An index is a benchmark used to determine a baseline interest rate. Every ARM loan is tied to an index. The index for your ARM is listed in your original loan documents. Margin is a fixed percentage that is added to the index rate to calculate the new interest rate. Index + Margin = Interest Rate.<\/p>\n<\/div><\/li><li><a name=\"question_1296\"><\/a><button class=\"question js-accordion-title\" tabindex=\"0\" aria-expanded=\"false\" aria-controls=\"ac_1296\" id=\"ach_1296\"><p>How is my principal payment amount calculated when my interest rate adjusts?<\/p><\/button><div class=\"answer js-accordion-content\" id=\"ac_1296\" aria-labelledby=\"ach_1296\" role=\"region\" style=\"display: none;\"><p>When your interest rate adjusts, we also calculate the amount of your monthly payment that will be applied to the principal \u2013 which is the remaining balance on your loan. To do this, we determine the principal payment amount needed to pay off your remaining balance by the loan maturity date, while taking into account the new interest rate and the need to maintain equal payments.<\/p>\n<\/div><\/li><li><a name=\"question_1297\"><\/a><button class=\"question js-accordion-title\" tabindex=\"0\" aria-expanded=\"false\" aria-controls=\"ac_1297\" id=\"ach_1297\"><p>Is there a limit on how much my interest rate can increase?<\/p><\/button><div class=\"answer js-accordion-content\" id=\"ac_1297\" aria-labelledby=\"ach_1297\" role=\"region\" style=\"display: none;\"><p>Yes. ARM loans have a rate limit indicating the maximum interest rate for the length of the loan, as well as the maximum amount your interest rate can increase with each adjustment.<\/p>\n<\/div><\/li><li><a name=\"question_1298\"><\/a><button class=\"question js-accordion-title\" tabindex=\"0\" aria-expanded=\"false\" aria-controls=\"ac_1298\" id=\"ach_1298\"><p>When should you consider an ARM?<\/p><\/button><div class=\"answer js-accordion-content\" id=\"ac_1298\" aria-labelledby=\"ach_1298\" role=\"region\" style=\"display: none;\"><p>Many homeowners choose an ARM to take advantage of the lower mortgage rates during the initial period. You may consider an ARM if you plan on moving or selling your home before the adjustment period of the loan, or if interest rates are high when you buy your home. Keep in mind that, with an ARM, there is uncertainty about how much your monthly payment will go up or down. Depending on the market, your rate could adjust upwards and increase your monthly payments.<\/p>\n<\/div><\/li><li><a name=\"question_2718\"><\/a><button class=\"question js-accordion-title\" tabindex=\"0\" aria-expanded=\"false\" aria-controls=\"ac_2718\" id=\"ach_2718\"><p>ARM Terminology<\/p><\/button><div class=\"answer js-accordion-content\" id=\"ac_2718\" aria-labelledby=\"ach_2718\" role=\"region\" style=\"display: none;\"><ul>\n<li><strong>Adjustment Frequency:<\/strong> This refers to the amount of time between interest-rate adjustments<\/li>\n<li><strong>Adjustment Indexes:<\/strong> Interest-rate adjustments are tied to a benchmark, in this case, the London Interbank Offered Rate (LIBOR)<\/li>\n<li><strong>Margin:<\/strong> When you sign your loan, you agree to pay a rate that is a certain percentage higher than the adjustment index. For example, your adjustment rate may be the rate of LIBOR plus 2%. That extra 2% is called the margin.<\/li>\n<li><strong>Caps:<\/strong> This refers to the limit on the amount the interest rate can increase each adjustment period.<\/li>\n<li><strong>Ceiling:<\/strong> This is the highest that the adjustable interest rate is permitted to reach during the life of the loan.<\/li>\n<\/ul>\n<\/div><\/li><li><a name=\"question_2721\"><\/a><button class=\"question js-accordion-title\" tabindex=\"0\" aria-expanded=\"false\" aria-controls=\"ac_2721\" id=\"ach_2721\"><p>What does it mean to have a fixed rate conversion feature with an adjustable mortgage loan?<\/p><\/button><div class=\"answer js-accordion-content\" id=\"ac_2721\" aria-labelledby=\"ach_2721\" role=\"region\" style=\"display: none;\"><p>A fixed-rate conversion feature allows the borrower to convert their adjustable-rate mortgage to a fixed rate without having to go through the expense of a refinance. The option to convert to a fixed rate is only available on the first, second, or third change date of the loan.<\/p>\n<\/div><\/li> <\/ol><\/div>\n\n\n<style>\n    .mod_faq_questions .answer {\n        padding-top: 1rem;\n    }\n    \n    .mod_faq_questions .answer ul li {\n        list-style: disc;\n    }\n<\/style>\n<\/div>\n\n\n\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:33.33%\"> <section role=\"search\" aria-label=\"Search Area: How Can we Help?\" class=\"mod-help\"> <div class=\"help-container\"> <h3 class=\"title\">How can we help?<\/h3> <form id=\"sidebar-search\" method=\"GET\" action=\"\/search\/\"> <label class=\"visuallyhidden\">Search our site<\/label> <input type=\"search\" name=\"search_key\" class=\"help-search-input\" placeholder=\"I want to...\" \/><button class=\"help-search-submit\"><img decoding=\"async\" src=\"https:\/\/www.deanbank.com\/wp-content\/themes\/dcb-theme\/images\/ico-sidebar-search.svg\" alt=\"Submit Search\"\/><\/button> <\/form> <\/div><\/section> <section aria-label=\"Related Products and Services\" class=\"nav-related\"> <h3>View our Products & Services<\/h3> <!-- Menu: 3 --><!-- Menu Name = 3 --><!-- Base ID = 730 because base is 730 --><nav class=\"menu_nav cm_3\" aria-label=\"Lending Menu\"><ul><li class='item_spot_60 expanded  not_current'>\r\n                            <!-- Base Parent ID = \/lending\/mortgages vs \/wp-json\/wp\/v2\/pages\/2675 --><a target='' class='' data-nav-item-id='mortgages' data-nav-item-parent-id='730' href='\/lending\/mortgages\/'>Mortgages<\/a><\/li><li class='item_spot_68 expanded  not_current'>\r\n                            <!-- Base Parent ID = \/lending\/home-equity vs \/wp-json\/wp\/v2\/pages\/2675 --><a target='' class='' data-nav-item-id='home-equity' data-nav-item-parent-id='730' href='\/lending\/home-equity\/'>Home Equity<\/a><\/li><li class='item_spot_70 expanded  not_current'>\r\n                            <!-- Base Parent ID = \/lending\/consumer-loans vs \/wp-json\/wp\/v2\/pages\/2675 --><a target='' class='' data-nav-item-id='consumer-loans' data-nav-item-parent-id='730' href='\/lending\/consumer-loans\/'>Consumer Loans<\/a><\/li><li class='item_spot_76 expanded  not_current'>\r\n                            <!-- Base Parent ID = \/lending\/business-credit-loans vs \/wp-json\/wp\/v2\/pages\/2675 --><a target='' class='' data-nav-item-id='business-credit-loans' data-nav-item-parent-id='730' href='\/lending\/business-credit-loans\/'>Business Credit & Loans<\/a><\/li><li class='item_spot_86 expanded  not_current'>\r\n                            <!-- Base Parent ID = https:\/\/payments.mwamplifi.com\/v2\/c\/148 vs \/wp-json\/wp\/v2\/pages\/2675 --><a target='' class='' data-nav-item-id='pay-my-loan' data-nav-item-parent-id='730' href='https:\/\/payments.mwamplifi.com\/v2\/c\/148\/'>Pay My Loan<\/a><\/li><\/ul><\/nav> <\/section> <\/div>\n<\/div>\n\n\n <div class=\"cross-sell-header\"> <div class=\"container\"> <p><a href=\" \/lending\/mortgages\/meet-our-lending-team\/mortgage-request-an-appointment\/\" class=\"\" target=\"\" \"> <span class=\"body\">Is an adjustable-rate mortgage right for you? 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