An Adjustable-Rate Mortgage, or ARM, is a mortgage with an interest rate that changes, or "adjusts," throughout the term of the loan. As a result of the fluctuating rate, the monthly payment on the loan may also adjust.
The interest rate on an ARM is based on a specific Index pre-determined by ACU and may be adjusted using a margin. The index and margins used by ACU are detailed below under each specific ARM product we offer. Please reach out to ACU directly to find out the current index rate.
The index is a measure of interest rates generally that reflects trends in the overall economy. Different Lenders use different indexes for their ARM programs. Common indexes include the U.S. Prime Rate and the Constant Maturity Treasury (CMT) rate. An index rate changes periodically which is why ARM rates are adjustable.
The margin is an extra percentage that the lender adds to the index. Together, the index and the margin make up your interest rate.
On the date of a scheduled rate change, if the index has adjusted, the interest rate on your ARM will adjust. Therefore, your payment will also adjust to reflect the new rate. If the new rate is lower, your payment will decrease. If the new rate is higher, your payment will increase.
The two numbers separated by a slash in the name of an ARM product tell you when your rate and payment will change. For example, a 5/5 ARM has its initial rate change after the first five years then it changes every five years after that. If you're looking at a 5/1 ARM, your initial rate change will occur after five years, then every year after that.
Yes. Your interest rate will not adjust, up or down, by more than 2.000% at each rate change date. Additionally, your interest rate will never be higher than your original interest rate plus 6.000%.
Yes. For the first rate change, ACU will send you a notice at least 210 days, but no more than 240 days, before the first payment at the adjusted interest rate is due. This notice will contain information about the adjustment, such as the new rate, payment, and loan balance. It's important to note that the interest rate and payment in this first notice are estimated. The purpose of the notice is to serve as a reminder that your rate and payment will adjust. A more accurate notice will be provided at least 60 days, but no more than 120 days, before the first payment at the adjusted interest rate is due.
This 60-120 day notice will be provided for all rate changes during the life of the loan and will also contain information about the adjustment, such as the new rate, payment, and loan balance.
ACU currently does not charge pre-payment penalties on its ARM products.
ACU offers a 5/5 ARM Primary product for 1-4 unit residential properties, condominiums, and manufactured homes to be used as the borrower's primary residence.
Assuming the maximum periodic increases in rates and payments:
The periodic payment may increase or decrease substantially depending on changes in the rate.
To calculate the P&I payment on a different loan amount, assuming the same rate and terms listed in the example above, use the following steps:
ACU offers a 5/5 ARM Secondary product for 1-4 unit residential properties, condominiums, and manufactured homes to be used as a borrower's second/vacation home or investment property.
Assuming the maximum periodic increases in rates and payments:
The periodic payment may increase or decrease substantially depending on changes in the rate.
To calculate the P&I payment on a different loan amount, assuming the same rate and terms listed in the example above, use the following steps:
Disclosures for ACU's other ARM programs are available upon request.
The information and examples above are effective as of August 9, 2024.
For current rates, please visit our rates page.
Athol Credit Union
513 Main Street
Athol, MA 01331