Adjustable Rate Mortgage Refinance

---

An adjustable-rate mortgage (ARM) refinance typically provides a lower interest rate for an initial payment period, making the initial monthly payments less than those a fixed-rate mortgage refinance usually offers.

After the lower initial rate period, the ARM interest rate will adjust to a fully indexed rate and could increase your rate and payments. If the rate goes up, your monthly payments go up, so you want to be financially prepared to make larger payments.

Adjustable-rate mortgage refinance loans are a good choice if you:

• Are planning to move in a few years (before the end of the initial rate period)
• Expect your income to rise enough in the coming years to cover any increase in payments resulting from an increase in the interest rate
• Want lower initial monthly payments than a fixed-rate mortgage usually offers
• Think interest rates may fall in the future

Some disadvantages of adjustable-rate refinance mortgages:

• If you plan to sell the home before the introductory period ends, there is an element of risk, as it can be difficult to predict exactly how long it will take to sell your home
• Interest rates will increase in a rising rate environment
• An increase in rates will increase your monthly payment amount, which may not keep pace with any increase in income
• An increase in interest rate will reduce accumulation of equity, especially where home values are declining, and may make it more difficult to refinance your loan again