Premium Only Content

How Do ARM Loans Work? (Adjustable-Rate Mortgages = Lower Rates)
ARM loans allow home buyers access to significantly lower rates vs. fixed rate mortgages. In this video, I explain how ARM loans work, who can benefit from using them, and how today's ARMs are vastly different compared to the products sold in the lead up to the 2008 financial crisis. See below for more details...
Mark Anderson, NMLS# 374393. Vice President, Home Loan Advisor at First Bank, NMLS# 551928. www.first.bank - Member FDIC, Equal Housing Lender
Call or Text me ANYTIME 24/7 @ 314-599-0511 for help with your mortgage.
Apply Online: https://www.first.bank/About/Locations/Mark-Anderson
This video is offered as a service and the information presented will be of a general nature. The views expressed in this video do not necessarily reflect the opinions of First Bank. First Bank does not provide any warranties whatsoever with respect to any materials or information provided in this video.
HOW DO ARM LOANS WORK?
Modern ARM loans are not fully adjustable. Technically, they are called 'fixed-adjustable hybrid' loans. You will have the option of a 5, 7 or 10 year period where your rate is fixed. This fixed rate is likely to be significantly lower vs. comparable fully fixed rate options. Once the fixed rate period expires, your rate will adjust with market rates at that time based on an index. Our ARM loans mostly use the SOFR index. The calculation to determine your adjusted rate is to take the index and add the 'margin' specific to your particular ARM loan. No matter what happens with market rates at the time of adjustment, you will have the benefit of a lifetime cap, which protects your rate from adjusting beyond a certain threshold.
WHO SHOULD USE AN ARM LOAN?
If you only plan to own the home for a period of time shorter than the fixed rate period on your ARM, you can take the full benefit of the lower ARM rate without ever facing an adjusted rate in the future. Even if you do plan to own the home long-term, it is important to note the fact that you are free to attempt a refinance at any time in the future without paying a prepayment penalty. For my clients, I use a software tool to track my closed loan clients' rates against the market over time. By using this tool, we can identify if there is ever an opportunity to take advantage of a lower rate environment down the road. ARM loans do carry some level of risk; it is possible you will face an adjustment toward a higher rate once your fixed rate period is over. If you are a risk-averse person, ARM loans are likely not a great choice. If you are comfortable with the potential for risk, you can save a lot of money using an ARM.
HOW ARE ARM LOANS DIFFERENT TODAY VS. PRE-2008 OPTIONS?
In the lead up to the financial crisis in 2008, ARM loans often carried a very short fixed rate period while also including prepayment penalties. This combination meant that folks on ARM loans had limited ability to refinance into fixed rate options if the need arose. There were other compounding factors which made ARMs much riskier in the past: weak underwriting standards, incompetent mortgage sales professionals, perverse incentives driving lenders to push dangerous ARM loans, etc. In today's environment, ARM loans carry longer fixed rate periods up to as long as 10 years. Underwriting standards are MUCH tougher. You would also be hard pressed to find an ARM which included any kind of prepayment penalty. For the right candidate, modern ARMs can be a great choice.
-
30:28
Solar Groove Muzic
1 day ago $0.01 earnedAFRO HOUSE MIX 2025 | The Best of Afro House Music
471 -
41:00
The Finance Hub
14 hours agoI CAN'T BELIEVE WHAT JUST HAPPENED TO SEN. ADAM SCHIFF!
902 -
LIVE
SynthTrax & DJ Cheezus Livestreams
1 day agoFriday Night Synthwave 80s 90s Electronica and more DJ MIX Livestream HEATWAVE Edition
465 watching -
LIVE
I_Came_With_Fire_Podcast
10 hours agoCHINA TRADE | RUBIO VISA | SENATE SECRETS | DEPORT BAN
617 watching -
8:01
MattMorseTV
5 hours ago $0.01 earnedNYC Democrat is in HOT WATER.
31514 -
LIVE
PandaSub2000
9 hours agoLIVE 10pm ET | Trump Victory, NYC Fallen, Pedro Pascal Fatigue + More!
116 watching -
8:33:14
Spartan
9 hours agoPro Halo Player | Scrims vs Shopify @ 3 EST | LVT Halo Pro League Qualifier @ 5 EST
23K3 -
LIVE
megimu32
4 hours agoOFF THE SUBJECT: FAFO Friday - Bodycam Breakdown + Fortnite With the Boys
334 watching -
2:06:35
TimcastIRL
4 hours agoSCOTUS Rules For Trump, INJUNCTIONS Blocked, Birthright Citizenship MAY END | Timcast IRL
200K72 -
9:07:53
Dr Disrespect
12 hours ago🔴LIVE - DR DISRESPECT - TOP 10 HOTTEST DEMOS OF 2025
170K12