What is an adjustable-rate mortgage (ARM) refinance loan?
An adjustable-rate mortgage (ARM) is a loan in which the interest rate may change periodically, usually based upon a pre-determined index. The ARM loan may include an initial fixed-rate period that is typically 3 to 10 years. The interest rate then may change (adjust) each year thereafter once the initial fixed period ends. For example, with a 5/1 ARM loan for a 30-year term, your interest rate would be fixed for the initial 5 years and could fluctuate up or down each subsequent year for the next 25 years.
Should I get a fixed-rate refinance loan or an ARM refinance loan?
ARM loans typically feature lower rates and monthly payments than comparable fixed-rate loans during the initial rate period, but rates could increase or decrease once the initial rate expires. While many home buyers prefer the security of a fixed-rate mortgage, an ARM can be a good choice, too - especially if you know you'll be moving within the next few years.
3- and 5-year ARM refinance loans
3/1 ARMs and 5/1 ARMs generally provide the lowest interest rates and monthly payments during the initial rate period. These loans are ideal for borrowers who don't want a long-term mortgage.
10-year ARM refinance loans
10-year ARMs may combine savings for the initial rate period with longer protection from market-based interest-rate fluctuations.
ARM refinance loan benefits and considerations
The best short-term ARM refinance rates
Conventional adjustable-rate mortgage (ARM) loans typically feature lower interest rates and Annual Percentage Rates (APRs) during the initial rate period than comparable fixed-rate mortgages. However, when rates are relatively low, a fixed-rate mortgage may make more sense.
Low monthly payments
An adjustable-rate mortgage (ARM) loan lets you keep your monthly payments low during the initial term of your home loan, giving you the option to pay down your mortgage faster. Use our adjustable-rate mortgage calculator to get an estimate of your monthly payments.
Conventional adjustable-rate mortgage (ARM) loans are available for refinancing existing mortgages. U.S. Bank offers 10/1 ARM, 5/1 ARM and 3/1 ARM options. Check out today’s refinance rates for 10/1 ARM and 5/1 ARM adjustable-rate refinance loans.
If you’re curious about the costs associated with refinancing, use our mortgage refinance cost calculator to get an estimate of how much it will cost.
ARM home loan eligibility requirements
Conforming loans are loans that conform to Fannie Mae and Freddie Mac guidelines. They are a good choice for borrowers with very good credit, which generally means a FICO score of 740 or higher. There are also established guidelines for income and other personal financial information.
ARM loan amount
The loan amount for a conforming ARM is generally up to $510,400 for a single-family home, though limits may be higher in regions where home prices are higher. Jumbo ARMs allow borrowers to exceed the conforming loan limit for higher-valued homes.
Compare mortgage options to learn more or contact a mortgage officer to find out which mortgage option may be the best fit for your individual needs.