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Is ARM loan right for me?

The most frequently asked questions when selecting a loan type is whether or not an Adjustable Rate Mortgage (ARM) loan is right for you? Typically the most preferred loan program is a Fixed Rate Mortgage however that does not make it the only or the right choice as selecting the best loan type depends completely upon your individual situation.

Asking yourself the below mentioned questions would help immensely:

  • Do you plan to stay in the property for a short time? - If you plan to stay in the property for a short time either because of frequent re-locations from your job or anticipating an empty nest after a few years which could mean you need to size down or if you see yourself expanding your family and would need a bigger house in the coming years then opting for an Adjustable Rate Mortgage is the right choice. The ARM loan offers a fixed rate for the initial 3 to 10 years before converting to an adjustable mode thus giving you the lowest rate and payment for the time you stay in the property and until you decide to move to a different house. 

  • Do you want the lowest rate available? - An adjustable rate mortgage or ARM loan offers the lowest interest rate thus making it an ideal choice if you are looking for the lowest rate and mortgage payment. An ARM loan is usually amortized over a 30 year and offers the lowest rate with a flexibility to pay additional payments towards your principle balance as they come with no prepayment penalty. This is an ideal choice for families where you want the lowest payment possible based on your budget and at the same time you need additional time to figure out your long term goals. With no prepayment penalty you can enjoy a fixed rate mortgage for the initial loan term as your long term plans materialize you could refinance to be on a fixed rate mortgage and with no prepayment penalty you can do this without a worry.

  • Are you an real estate investor? - A typical real estate investor would keep a property as a rental income source for an average of 5-7 years before selling it to liquidate the equity earned over those years. An adjustable rate mortgage is a perfect choice if you are an investor, going for a 5/1 ARM or a 7/1 ARM program will give you extremely competitive rates as compared to a 30 year fixed rate mortgage thus increasing your profits and with no prepayment penalty for early payments it gives you an option to build more equity before you decide to sell the property.

If you plan to stay in the property for a long time and do not have any plans of selling or moving out soon then going for a fixed rate mortgage is advisable, a fixed rate mortgage would offer a peace of mind for the life of the loan as the payment would not change until the last payment has been made and here again with no prepayment penalty you could sell the property sooner if there are changes in your plan. A fixed rate mortgage offers different loan terms like a 30, 25, 20, 15 and a 10 year mortgage thus giving you the freedom to choose the right loan term based on your affordability.   

adjustable RATE MORTGAGE

This section will give you a good Idea of the mortgage process and the time frame involved.  The knowledge will help you feel more comfortable as you understand and go through the steps.

An adjustable-rate mortgage (ARM) is a 30 year home loan with an initial fixed rate period, typically 3 to 10 years. The interest rate may change on an annual basis once the fixed portion of the loan expires. For example, with a 5/1 ARM loan, your interest rate would be fixed for 5 years, and could fluctuate up or down each subsequent year for the next 25 years.

ARM loans typically feature lower rates and monthly payments than comparable fixed-rate loans during the initial rate period, but rates could increase once the initial rate expires. While many home buyers prefer the security of a fixed-rate mortgage, an ARM can be a good choice too especially if you know you'll be moving within the next few years.

3/1 ARM's and 5/1 ARM's generally provide the lowest interest rates and monthly payments during the initial rate period ideal for those who don't want a long-term mortgage. 10 Year ARM's are an increasingly popular option because they combine significant savings for the initial rate period with longer protection from market-based interest-rate fluctuations.


Thank you so much for your help in refinancing my mortgage loans.  You were wonderful in being patient with me and going into detail to explain anything I had any questions about.  I will be sure and recommend you for future friends. 

- Desiree Young, TX


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