Adjustable-Rate Mortgages Reading PA

Adjustable rate mortgages (ARMs) from Bellco Federal Credit Union can be an excellent option if you plan to move or refinance your Reading, PA home within a few years. Under the right circumstances, an ARM can save you money in interest. 

Bellco FCU offers adjustable-rate mortgages and a variety of other home loan options with different terms and qualifications, such as fixed-rate mortgages, FHA loans, USDA Rural Housing loans, and more, that may be available for primary residences, vacation homes, or investment properties.

About Adjustable-Rate Mortgages

As the name implies, the adjustable rate mortgage (ARM) has an interest rate that adjusts, or fluctuates, on a predetermined basis. This can cause your monthly payments to go up or down, depending on the interest rate at the time of adjustment. ARMs are different from fixed-rate mortgages, which carry the same interest rate for the life of the loan.

You may see ARMs described in 3/1, 5/1, 7/1, and 10/1 terms. The “3” in the “3/1” ratio, for example, tells you the length of time the loan will stay at the initial interest rate.  The “1” in the “3/1” ratio tells you how often the interest rate (and your payment) will adjust. So, a 3/1 ARM has a three-year initial fixed-rate period and then will adjust once each year until the loan is repaid.

Pros and Cons of the ARM Mortgage

Here, in a nutshell, are the advantages and disadvantages of the adjustable rate mortgage:

  • Pros – In general, you will start off with a lower interest rate than you might otherwise be able to get with a conventional fixed-rate mortgage. If interest rates remain steady or go down while you have the loan, you could save money.

  • Cons – Once adjustable rate mortgages reach the adjustment period, they can be unpredictable because you never know whether they will adjust up or down. It rates increase, the size of your monthly payment will increase, too.

The adjustable rate mortgage can save you money in some situations. If you are only planning to stay in the home for a short time, an ARM loan (as opposed to a fixed-rate mortgage) may help you secure a lower interest rate for the period of time before the adjustment period kicks in.

Let’s say, for example, that you purchase your home using a 5/1 ARM. If you move and sell the home within five years, the mortgage will still be in its initial fixed-rate period and will not have adjusted yet. Selling the home (or refinancing the mortgage) before your payments start to adjust can be a good strategy.

Bellco FCU’s locally-knowledgeable loan advisors will be happy to discuss your goals and help you establish an affordable home mortgage loan that meets your unique needs.

How to Become a Member

Bellco FCU offers membership to people who live, work, worship, or attend school in Berks County, including immediate family members, such as your spouse, children, siblings and parents. 

Open a primary Member Savings account with as little as $5 and follow a few simple steps to become a member. And, once you join Bellco FCU, you may remain a member forever, even if you change jobs, retire, or move away from Berks County. 

Get more information about adjustable rate mortgages and other home loan options from Bellco FCU in Reading, PA, to find one that best suits your financial situation.