Adjustable-Rate Mortgage (ARM)

What Is an Adjustable-Rate Mortgage?

An adjustable-rate mortgage (ARM) is a type of home loan that features an initial fixed interest rate for a set number of years—after which the rate adjusts periodically based on market conditions. This loan structure provides the opportunity for lower initial monthly payments and potential long-term savings, especially for buyers who don’t plan to stay in their home for decades.At Midwest Mortgage Lending (Florida), we offer multiple ARM structures—including 10/1 ARMs, 15-year adjustable-rate mortgages, and 1-year ARM options—designed to suit different financial plans.

Benefits of Adjustable-Rate Mortgage (ARM)

1. Competitive Initial Interest Rates:
   ARMs typically start with lower rates than fixed-rate loans, helping reduce your monthly housing costs during the initial years.

2. Low Down Payment Requirements: Qualify for homeownership with as little as 5% down, making it easier to enter the market.

3. Flexible Payments: If interest rates fall after your fixed period ends, your monthly payments may decrease.

4. Great for Short-Term Buyers: A good fit for buyers who plan to move, upgrade, or refinance within 5 to 10 years—such as with a 10/1 adjustable-rate mortgage.

Eligibility Criteria for ARMs

To qualify for an ARM loan in Florida, here’s what you’ll typically need:

1. Minimal 5% Down Payment: Lower than many conventional options, ideal for first-time or budget-conscious buyers.

2. Credit Score of 620 or Higher: A fair credit score gives you access to competitive rates on most ARM products

3. Adaptable Credit Profiles Accepted: ARM lenders may be more flexible with applicants who have limited credit histories.

4. Lower Monthly Payments Initially During the fixed-rate period, monthly payments are often significantly reduced.

Common Adjustable-Rate Mortgage Types We Offer

1. 10/1 Adjustable-Rate Mortgage: Fixed rate for 10 years, then adjusts annually. Great for mid-term ownership plans.

2. 15-Year Adjustable-Rate Mortgage: A rare option offering fast repayment with initial flexibility.

3. 1-Year Adjustable-Rate Mortgage: Typically for experienced borrowers or investors seeking aggressive rate advantages.

4. VA Adjustable-Rate Mortgage: Veterans can benefit from an ARM tailored through the VA loan program, often with even lower interest rates and no PMI.

How ARM Rates are Calculated:

Your adjustable-rate mortgage rate is determined by two main parts:
‍
- Index (such as SOFR)
- Lender-set margin
‍The sum of these determines your fully indexed rate. ARM loans also include caps that limit how much your interest rate can rise at each adjustment and over the life of the loan—helping protect your budget.

Pros and Cons of Adjustable-Rate Mortgages

Pros:

1. Lower initial payments

2. Easier to qualify for larger loan amounts

3. Ideal for short-term buyers or those expecting income growth

4. Possible future payment reductions if rates drop

Cons:

1. Rates may increase after the initial period

2. Payments can become unpredictable

3. Complex planning required

4. May not suit long-term homeowners

Who Should Consider an ARM?

1. Short-Term Homeowners
   Planning to move or refinance before the adjustment kicks in

2. Buyers Expecting Future Income Increases
   Great if you’re early in your career and anticipate growth

3. VA Loan Borrowers in Florida
   Qualified veterans may consider an adjustable-rate mortgage VA for lower costs upfront

Fixed vs. Adjustable-Rate Mortgage

If you're a risk-averse buyer or plan to stay in your home for decades, a 30-year fixed-rate mortgage may be more suitable. However, if your goals are more short-term or you anticipate market rate shifts in your favor, an ARM could save you thousands over time.

Start Your Home Financing with Midwest Mortgage Lending (Florida)

At Midwest Mortgage Lending (Florida), we help you compare options and secure the best adjustable-rate mortgage for your goals—whether that’s a 10/1 ARM, a 15-year adjustable-rate mortgage, or a VA-backed ARM loan. We work with borrowers across the state to find flexible, cost-effective financing solutions.Get in touch today to discuss ARM options tailored for Florida residents and lock in the right rate for your future.