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VA Adjustable Rate Mortgage (ARM) Options

By: Grant Moon 09/02/12 07:39 am

VA Adjustable Rate Mortgage (ARM) Options

Home loans are one of the foundations of this country, and they’re the key way for those who want to own their own home to go about doing so. And while there are countless options for those who are pondering a mortgage, those who are military members or veterans will have even more. There are several excellent types of loans that are designed exclusively for service members, and it’s a good idea to take a look at what they can offer you. VA adjustable rate mortgages are a perfect example of the choices you’ll have, and learning more about it is important.

There are two main types of VA adjustable rate mortgages, or ARMs. The first is the basic ARM. In this type of loan your interest rates will change based on the terms of your loan, as well your monthly payments. Basically, your interest rate when you take out the loan will remain in effect for one year and the maximum adjustment per year is one percent and capped at a maximum of 5% for the life of the loan. This is a good option for those will only be living in a property for a certain amount of time and believe that they can sell the property when they move. Also, a benefit of this option is that your risk is limited because your rate adjustment is capped at 5% which is about 1.5% higher than fixed rate loans today.

A VA Hybrid ARM Mortgage is the second option. The big difference in this type of ARM and a standard one is that this loan will carry a fixed interest rate for a longer period of time than a regular ARM. For the Hybrid ARM your initial rate will remain fixed for three years and you’ll pay the basic interest rate and monthly payment that you started with. With the hybrid option the initial rate adjustment can be as high as 2% if the fixed rate period is five years or longer. Annual adjustments are capped at 1% annually if the fixed rate period is less than five years and 2% if the fixed rate period is five years or longer.  When loan has a fixed rate less than five years the initial adjustment is limited to 1% and capped at 5%.

These loans usually feature great starting interest rates. But it’s important that you take the time to understand just how much your payments will increase, what the interest rate increases could mean, and more. Your specific situation will dictate when an ARM is an option to consider.  Read the terms of the loan fully so that you know exactly what to expect since all of the details of the loan and the adjustable interest rate will have to be disclosed clearly within it.

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