How It Works
With most ARMs, the interest rate and monthly payment are fixed for an initial time period, such as one year, three years, five years or seven years. After the initial fixed period, the interest rate can change every year. For example, one of Bank SNB’s most popular adjustable rate mortgages is a seven-year (7/1) ARM. The interest rate will not change for the first seven years (the initial adjustment period) but can change every year after.
Our ARM interest rates change in relation to an index rate. Using an index to determine future rate adjustments gives you assurance that rate adjustments will be based on actual market conditions at the time of the adjustment. If the index rate moves up, so does your mortgage interest rate, meaning you will probably have a higher monthly payment. On the other hand, if the index rate goes down, your monthly payment may decrease. The current value of most indexes is published weekly in the Wall Street Journal.
To determine the interest rate on an ARM, we'll add a pre-disclosed amount to the index called the "margin." If you're still shopping, comparing one lender's margin to another's can be more important than comparing the initial interest rate, since it will be used to calculate the interest rate you will pay in the future.
An interest-rate cap places a limit on the amount your interest rate can increase or decrease. There are two types of caps:
- Periodic (or adjustment) caps limit the interest rate increase or decrease from one adjustment period to the next.
- Overall (or lifetime) caps limit the interest rate increase over the life of the loan.
Interest rate caps are very important because the future is unpredictable. All Bank SNB ARMs have both adjustment and lifetime caps.
Selecting a mortgage may be the most important financial decision you will make, and you deserve all the information you need to make the right decision.
Talk with one of our loan officers to determine the mortgage that’s right for you.
The interest rates, annual percentage rates and points shown below are subject to change without notice.