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 changes 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.
