WHY SHOULD I CONSIDER AN ADJUSTABLE RATE LOAN?
Most people choose this type of loan because the starting interest rate is lower than a fixed rate loan. Adjustable Rate Mortgages (also known as "ARM" Loans) do exactly what the name says -- the interest rate adjusts throughout the life of the loan. When fixed rates are high, these loan options are your best bet, and in a declining interest rate market, you can get a lower interest rate and lower payments without having to refinance.

HYBRID FIXED-ARM LOANS
Hybrid Fixed-ARM loans combine the stability of a fixed rate loan with the low interest rates of an ARM. Buy more home and have rate stability -- the best of both worlds! These loans offer a fixed rate for 3, 5, 7, or 10 years, after which the loan turns into a traditional ARM. Are they fixed? Are they adjustable? A little bit of both.

Nationwide, most people keep their mortgage only 5 years on average, and in California, we tend to keep our loans for even less time. That is why Hybrid Fixed-ARM Loans are a perfect fit for most Californians. If you plan to sell your house or refinance in the next few years, this may be the right loan for you.

TRADITIONAL ARM LOANS

• 6-Month ARM Loans
  This loan has a low start rate and is designed to adjust every 6 months. At the adjustment date, your interest rate changes and stays fixed for another 6 months. The maximum your rate can change at any adjustment date is 1%. This is a fully amortized loan, and at the end of the loan period, you will have paid off your mortgage.

• 1-Year ARM Loans
  This loan has a low start rate and is designed to adjust every 12 months. At the adjustment date, your interest rate changes and stays fixed for another year. The maximum your rate can change at any adjustment date is 2%. This is a fully amortized loan, and at the end of the loan period, you will have paid off your mortgage.

THE INTEREST RATE EQUATION
The interest rate on an ARM is made up of two parts: The Index and the Margin. The index is a measure of interest rates generally, and the margin is an extra amount that the lender adds. If the index moves up, so does your interest rate. On the other hand, if the index rate goes down, your monthly payment can go down.

Be sure to talk to your specialist to get the full details.