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These rates and APRs are current as of $date and may change at any time. They assume you have a FICO® Score of 740+ and a down payment of at least 25%, that the loan is for a single-family home as your primary residence and that you will purchase up to one mortgage point.
Mortgage points, or discount points, are a form of prepaid interest you can choose to pay up front in exchange for a lower interest rate and monthly payment. One mortgage point is equal to about 1% of your total loan amount, so on a $250,000 loan, one point would cost you about $2,500. Connect with a mortgage loan officer to learn more about mortgage points.
Adjustable-rate mortgage loans are usually referred to as ARMs. These loans are typically offered with a 30-year term. A 5-year ARM has a fixed rate for the first five years. Then the rate becomes variable and adjusts every year for the remaining 25 years of the loan. In addition to 5-year ARM loans, U.S. Bank also offers 7-year ARM and 10-year ARM options.
A 5-year ARM loan is a variable-rate loan with an initial fixed-rate feature. After an initial five-year period, the fixed rate converts to a variable rate. It stays variable for the remaining life of the loan, adjusting every year in line with an index rate, which fluctuates with market conditions. If the index rate increases substantially, so could your mortgage payment. And if the index rate goes down, then your monthly mortgage payment could decrease. All 5-year ARMs set limits on how high or low the rate may go.
A 5-year ARM has an initial fixed rate for five years and an adjustable rate for the remaining life of the loan. Your monthly payment could increase or decrease after the first five years depending on how the index rate fluctuates. In comparison, a 30-year fixed-rate loan has a fixed rate and fixed monthly payment for the entire 30-year term. A 15-year fixed-rate loan has a fixed rate and fixed monthly payment for the entire 15-year term.
Learn more about the differences between a 5-year ARM and a 15- or 30-year fixed-rate loan.
If you plan to sell your home or pay off your mortgage within five years, then a 5-year ARM may be right for you. Rates on ARMs are usually lower than rates on comparable fixed-rate mortgages, so their monthly mortgage payments are lower. The 5-year ARM offers these lower rates and the predictability of a fixed-rate mortgage for the first five years.
If you’re not going to move or pay off your loan within five years, then you need to consider the risk involved with an ARM. After the initial five-year period, the rate on your loan will adjust every year in line with an index rate. When that rate goes up, so will your interest rate and your monthly mortgage payment. A 5-year ARM may still be right for you if you can afford fluctuations in your monthly mortgage payment. Keep in mind, though, that it’s difficult to predict market or life changes.
Contact us today at 855-916-0678 and a dedicated mortgage loan officer can help you choose the loan that is best for you.