Available adjustable terms for ARMs
5/6 Adjustable Rate Mortgage
7/6 Adjustable Rate Mortgage
10/6 Adjustable Rate Mortgage
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What are the advantages to an ARM?
Take advantage of falling interest rates
ARM loans can benefit you in a falling interest rate environment. Your interest rate will fall with the market during times of declining interest rates. Conversely, you assume the risk that your interest rate may rise during periods of rising interest rates.
Get a lower rate if you plan to move or refinance soon
ARMs can benefit you if you plan to move or refinance your mortgage before your fixed period expires. You may get access to a lower rate with an ARM, which can allow you to save money before your rate adjusts.
Interest rate changes are capped
CapCenter's ARM products have built in interest rate caps that protect you against dramatic shifts in interest rates. Our products offer either a 2/1/5 cap or a 5/1/5 cap depending on which ARM product you choose.
Why choose CapCenter?
Unbelievable savings.
Competitive interest rates.
Expert service.
Transparent pricing.
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Frequently asked questions
How do interest rate caps work on ARMs?
Interest rate caps appear as a sequence of three numbers. Each number represents a limit on how much your interest rate can fluctuate. Caps are designed to protect homeowners and lenders against dramatic interest rate changes. Most of our ARM products have a 2/1/5 cap. Here's what the numbers represent:
Initial Cap:
This number limits how much your interest rate can change on its first adjustment. For example, your interest rate can only rise or fall by 2% on your first adjustment with a 2/1/5 cap.
Periodic Cap or Subsequent Cap:
This number limits how much your interest rate can change at each adjustment, after your first rate change. For example, you interest rate can only fluctuate by 1% on subsequent adjustments with a 2/1/5 cap.
Lifetime Cap
A lifetime cap limits how much your interest rate can fluctuate over the entire life of your ARM. If your mortgage has a 6% interest rate with a 2/1/5 cap, your rate will never fall below 1% or rise above 11%.
What are the numbers on an ARM?
ARM products are marketed with two numbers that govern how your rate will adjust. CapCenter offers 5/6, 7/6, and 10/6 ARMs. The first number represents the number of years your interest rate will remain fixed before it begins to change. The second number represents how often your rate will change after your fixed period expires. Here's how are adjustable products works:
5/6 Adjustable Rate Mortgage
A 5/6 ARM has a fixed period of 5 years and an adjustment frequency of 6 months. This means your rate will not change for the first 5 years of your loan. Your rate will begin to change every 6 months once the 5 year period has passed.
7/6 Adjustable Rate Mortgage
A 7/6 ARM has a fixed period of 7 years and an adjustment frequency of 6 months. This means your rate will not change for the first 7 years of your loan. Your rate will begin to change every 6 months once the 7 year period has passed.
10/6 Adjustable Rate Mortgage
A 10/6 ARM has a fixed period of 10 years and an adjustment frequency of 6 months. This means your rate will not change for the first 10 years of your loan. Your rate will begin to change every 6 months once the 10 year period has passed.
How is the rate calculated on an ARM?
There are two numbers that influence your rate on an adjustable mortgage - index and margin. These two numbers are added at each rate change to determine your new rate (New Rate = Current Index + Margin).
Adjustable Rate Index
All adjustable mortgages are tied to a rate index. CapCenter products are indexed to the Secured Overnight Financing Rate (SOFR). The SOFR is updated daily and serves as the starting number for your rate.
Adjustable Rate Margin
The adjustable rate margin is added to the current index rate each time your rate changes. CapCenter's adjustable products have a 2.75% margin. If the SOFR is 4% on the date of your rate change, your new interest rate will be 6.75%.
Are ARMs riskier than fixed rate loans?
In short, yes, loans with adjustable rates are more risky than fixed rate loans. With a fixed rate loan, your payments will remain relatively stable. This gives you more certainty when setting your monthly budget. As such, most homeowners ARMs to get a lower rate in the short term. Homeowners can eliminate the risk of rising rates by refinancing their ARM into a fixed rate mortgage. CapCenter offers rate reduction features that can help you get a lower rate on a fixed loan. These features include lender paid temporary buydowns and float down rate locks.
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