Adjustable Rate Mortgages
Mars Bank offers adjustable rate mortgages for home purchases and refinances. Additionally, we offer a “buy down” feature that lets you reduce your initial fixed interest rate. Buying what are called mortgage points at closing can reduce the initial fixed interest rate and payment, thereby lowering the amount of interest paid on the mortgage loan. Mars Bank has mortgage point buy downs that result in the lowering of the initial fixed interest rate by 1/8%, 1/4%, and 1/2%. More information is below, or email us to learn more.
What is an Adjustable Rate Mortgage (ARM)?
A fixed rate mortgage, as the name implies, has a rate that remains the same throughout the term of the mortgage loan. An ARM has a fixed term at the outset of the mortgage loan, then has an adjustment at preset periods for the balance of the payback term.
ARMs are usually designated in terms of the initial fixed term then the amount of time that an adjustment to the rate could occur. A 5/1 ARM represents a five-year fixed initial interest rate with a one year adjustment cycle. The interest rate will adjust the first time after the five-year term (five years from the loan closing date), and then could adjust on each of the one year anniversaries thereafter.
It is important to understand the terms of an ARM by reviewing carefully the loan documents with your mortgage originator. Contact us to discuss your situation.
What Terms are Available for a Mars Bank ARM?
Mars Bank offers terms to meet your needs:
- 5/1 ARM (five years fixed initial rate term, then adjustable rate adjusted each 1 year on the anniversary date of the ARM closing date)
- 7/1 ARM (seven years fixed initial rate term, then adjustable rate adjusted each 1 year on the anniversary date of the ARM closing date)
- 10/1 ARM (ten years fixed initial rate term, then adjustable rate adjusted each 1 year on the anniversary date of the ARM closing date)
- 15/1 ARM (fifteen years fixed initial rate term, then adjustable rate adjusted each 1 year on the anniversary date of the ARM closing date)
Why an ARM?
Homebuyers find ARMs attractive when interest rates are high because ARM rates may be lower than fixed-rate loans. Also, homebuyers who plan to stay in their home for a short time – that is within the initial interest rate term – may benefit from the lower initial interest rate.
ARMs have a “floor”, the lowest the interest rate will adjust below the initial fixed interest rate, and an “initial cap” that is a preset amount that the interest rate can rise at any annual adjustment. There also is a “subsequent cap” that represents the ceiling or highest interest rate to which the ARM can adjust during the full term of the loan.
To see Mars Bank’s current interest rates, click here. The online calculator will help you view different term options. Also, sign up for Rate Watch to receive regular updates regarding today’s rate.
Benefits of a Mars Bank ARM
Mars Bank is an award-winning mortgage originator and services (provides ongoing customer support) for our adjustable rate mortgages. That means we’re available locally for a call, email, Zoom meeting, or in-person meeting to discuss your mortgage needs.
One Year Adjustments after the Initial Fixed Interest Term
Many adjustable rate mortgages index and change interest rates every 3 or 6 months after the initial fixed interest rate term ends. Mars Bank ARMs adjust every 12 months. This means you can budget annually for your mortgage payment without adjustments during the months between your mortgage anniversary date.
Buying Down Your Initial Term Interest Rate – up to 2 Points
As mentioned above, Mars Bank offers the opportunity to buy down the initial interest rate of a mortgage. A special benefit of a Mars Bank ARM is that the buyer can purchase (or use seller assist) for up to 2 points. Here’s how it works:
A payment of a percentage of the mortgage amount is paid as part of the closing costs. There are three options: 1/2 point, 1 point, or (on Mars Bank ARM loans) 2 points.
1/2 point equals .50% of the mortgage amount. For example, on a mortgage of $100,000, 1/2 point is $500. For a mortgage of $100,000, 1 point is $1,000, and 2 points is $2,000. Points affect the interest rate:
- 1/2 point purchased reduces the initial fixed interest rate by .125%
- 1 point purchased reduces the initial fixed interest rate by .25%
- 2 points purchased reduces the initial fixed interest rate by .50%
A bit confusing? Contact a mortgage expert through email or call 724-776-3803. We’re here to explain the entire process and answer all your questions.
An Advocate to Discuss Refinancing
Refinancing is always available through Mars Bank. At any time you can contact your mortgage originator to discuss if the rates and your situation warrant a refinance of your adjustable rate mortgage to another ARM or to a fixed-rate mortgage.
Consider Your Options for the Right Mortgage
Before proceeding with a home purchase or refinance, research the options available in your situation.