When Is an Adjustable-Rate Mortgage a Good Option?

Adjustable-Rate Mortgages (ARMs) begin with a fixed interest rate and then adjust up or down after the initial term. ARMs are a good option for buyers who don’t plan to stay in their home for more than 5 years and want to keep their monthly payment low.

ARM products contain 2 numbers:

  • The first refers to the number of years the interest rate will remain fixed.
  • The second is the number of years between interest rate changes after the initial fixed term expires.

For example, a 5/5 ARM would have the same interest rate for the first 5 years, and then the rate would adjust every 5 years after that.

Loan Features

  • Low Initial Fixed Rate

    During the initial term of your loan, your interest rate will be lower, making your payments more affordable. During the remaining term, the interest rate will change according to an index.

  • No Private Mortgage Insurance Required for Most Loans

    Most lenders require the borrower to purchase PMI unless they're able to make a down payment of 20%. Most of our Adjustable-Rate Mortgages don’t require PMI, which saves you money each month.

  • Refinance Options Available

    If you have a mortgage already and want to refinance for a different interest rate or shorter term, this loan may also be a good fit.

Rates 1 2

Loan Type Interest Rates As Low As Discount Points APR As Low As First Cap Subsequent Cap Lifetime Cap
5/5 Conforming ARM 2.000% 0.250 2.375% 2.00% 2.00% 5.00%

Rates as of Jan 22, 2021 ET.

The interest rate above shows the option of purchasing discount points to lower a loan's interest rate and monthly payment. One point amounts to 1% of the loan amount and is paid at closing. Points don't always have to be round numbers. Purchasing 1.5 points would cost $3,000 on a $200,000 mortgage.

Rates displayed are the as low as rates for purchase loans and refinances of existing Navy Federal loans. Rates for refinance loans where the existing lender is not Navy Federal are subject to a 0.750% higher rate.

Contact us at 1-888-842-6328 to learn more about our 3/5 ARM loan option.

5/5 Conforming ARM Payment Example1

Loan Amount: $250,000 Term: 30 years
Year Interest Rate APR Monthly Payment
Taxes and insurance not included; therefore, the actual payment obligation will be greater.

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Disclosures

1

Adjustable Rate Mortgages are variable, and your Annual Percentage Rate (APR) may increase after the original fixed-rate period. The First Adjusted Payments displayed are based on the current Constant Maturity Treasury (CMT) index, plus the margin (fully indexed rate) as of the stated effective date rounded to nearest 1/8th of one percent.

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2

This rate offer is effective 01/22/2021 and subject to change. Rates displayed are the "as low as" rates for purchase loans and refinances of existing Navy Federal loans. Rates for refinance loans where the existing lender is not Navy Federal are subject to a 0.750% higher rate. Rates are based on creditworthiness, loan-to-value (LTV), occupancy and loan purpose, so your rate and terms may differ. All loans subject to credit approval. Rates quoted require a loan origination fee of 1.00%, which may be waived for a 0.25% increase in interest rate. Many of these programs carry discount points, which may impact your rate.

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3

The cash-back bonus is offered in most states and is available for individual sales and purchases of property; offer limited to one cash-back bonus per property with no limit on the amount of times you may use the program. In some states, a gift card or commission credit at closing may be provided in lieu of the cash-back bonus. The program is not available in IA or outside the U.S. Cash-back bonus is not available in AK, LA or OK. In KS and TN, a gift card with preloaded points that are ready for spending at specified retail establishments after closing will be issued. State regulations in KS limit the dollar amounts and the type of incentive. In MS, NJ, and OR, a commission reduction may be available at closing. Please check with the program coordinator for details. This is not a solicitation if you are already represented by a real estate broker. The cash-back bonus is only available with the purchase or sale of your home through the use of a program-referred and -approved real estate agent. The size of your cash-back award depends on the value of the property you are buying or selling. Obtaining the full $8,000 cash-back award requires transacting in a property valued at $1.75 million or greater. To calculate the size of your potential cash back, please visit navyfederal.org/realtyplus. All real estate transactions are negotiable. Contact RealtyPlus for terms and conditions. Standard listing fees apply.

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