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A few options are available to fit your individual needs and your
risk tolerance with the various market instruments.
ARMs with different indexes are available for both purchases and
refinances. Choosing an ARM with an index that reacts quickly lets you take full
advantage of falling interest rates. An index that lags behind the market lets
you take advantage of lower rates after market rates have started to adjust
upward.
The interest rate and monthly payment can change based on
adjustments to the index rate.
6-Month
Certificate of Deposit (CD) ARM
Has a maximum interest rate adjustment of 1% every six months. The 6-month
Certificate of Deposit (CD) index is generally considered to react quickly to
changes in the market.
1-Year
Treasury Spot ARM
Has a maximum interest rate adjustment of 2% every 12 months. The 1-Year
Treasury Spot index generally reacts more slowly than the CD index, but more
quickly than the Treasury Average index.
6-Month
Treasury Average ARM
Has a maximum interest rate adjustment of 1% every six months. The Treasury
Average index generally reacts more slowly in fluctuating markets so adjustments
in the ARM interest rate will lag behind some other market indicators.
12-Month
Treasury Average ARM
Has a maximum interest rate adjustment of 2% every 12 months. The treasury
Average index generally reacts more slowly in fluctuating markets so adjustments
in the ARM interest rate will lag behind some other market indicators.
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