Exploring Adjustable-Rate Mortgages for Your New Home

What Is an Adjustable-Rate Mortgages?

An Adjustable-Rate Mortgage (ARM) starts with a fixed interest rate for a set number of years, then adjusts periodically based on market conditions. People Driven Credit Union offers two ARM options for primary residence purchases and refinances.

7/1 ARM: Your interest rate is fixed for the first seven years. After that, it adjusts once per year based on current market conditions.

10/10 ARM: Your interest rate is fixed for the first ten years. After that, it adjusts every ten years. This option gives you a longer window of predictability before any rate changes occur.

Neither product has a prepayment penalty, which means you can refinance into a fixed rate mortgage at any time without being penalized for paying off the ARM early. That flexibility is one of the most important features to understand before you decide.

Why Consider an Adjustable-Rate Mortgages?

Lower payments in the early years. ARMs typically come with a lower starting interest rate compared to a fixed rate mortgage. In a market where every dollar counts, a lower initial rate means a lower monthly payment from day one. For buyers who are stretching to afford a home in a competitive market, that difference can be meaningful.

Practical for shorter time horizons. If you do not plan to stay in the home for more than seven to ten years, the fixed portion of an ARM covers your entire stay. You get the benefit of the lower rate without ever experiencing a rate adjustment. This applies to buyers who know they may relocate for work, plan to upsize as their family grows, or expect a significant income change in the next several years.

Rate caps protect you from drastic increases. Modern ARMs include interest rate caps that limit how much your rate can increase during any single adjustment period and over the life of the loan. These caps provide a ceiling on your worst-case scenario and make it possible to plan for potential rate changes.

May help you qualify for a larger loan. Because the initial rate on an ARM is lower, your debt-to-income ratio at time of application is also lower. That can make it easier to qualify for a larger loan amount, which matters if you are competing in a market with limited inventory or looking at move-in-ready homes above your fixed rate budget.

What to Think About Before You Choose an Adjustable-Rate Mortgages

An ARM is not the right choice for every situation. If you plan to stay in the home long-term and want the certainty of a payment that never changes, a fixed rate mortgage is the safer option. The key questions to ask yourself are how long you plan to stay, whether your income is expected to grow, and how comfortable you are with the possibility of a higher payment after the fixed period ends.

It is also worth noting that refinancing an existing mortgage may result in higher total finance charges over the life of the loan, so timing and market conditions matter when you evaluate whether to refinance out of an ARM before the adjustment period begins.

Talk to PDCU Before You Decide

The best mortgage decision is one made with full information. People Driven Credit Union works with Member First Mortgage to offer both ARM and fixed rate options for Michigan members. Our mortgage loan officer Michelle Dzon can walk you through the numbers side by side, explain down payment assistance programs you may qualify for, and help you decide which product fits your situation. You can reach Michelle directly at 616-301-1714 or email michelle.dzon@memberfirstmortgage.com.

Ready to start exploring Adjustable-Rate Mortgages? Apply online through Member First Mortgage or visit any of our five Michigan branches in Livonia, Southfield, Warren, Romeo, or Ypsilanti.

Disclosures

Equal Housing Lender. Member First Mortgage, LLC (MFM) NMLS ID# 149532. All loans are subject to credit approval. Terms and conditions apply. Mortgage insurance may be required based on borrower qualifications. Program availability is subject to change without notice.

*Rates may vary, and payment may increase after consummation.

*Available on all purchase or refinance applications for a primary residence using a conventional 7/1 or 10/10 ARM loan product with People Driven Credit Union. This is not a commitment to lend. All lending products are subject to credit and property approval. Additional restrictions may apply. Refinancing an existing mortgage loan may result in higher total finance charges over the life of the loan. Rate may increase after consummation.