An adjustable-rate mortgage (ARM) offers flexibility in higher interest rate markets. With an ARM, the interest rate changes periodically, usually in relation to an index, and payments may increase or decrease accordingly.
PSECU offers 1-, 3-, 5-, and 7-year ARMs which means the monthly payment and interest rate will be locked in for the initial period and may change annually thereafter. For example, a 1-Year ARM has a fixed rate for the first 12 months and then may change annually. After the initial period, and each year thereafter, the interest rate will either remain the same, increase, or decrease based on the current rate environment at that time. The maximum the rate can increase or decrease in any one year is 1%, and over the full term of the mortgage the rate can only increase by a maximum of 5% over the original interest rate.