Adjustable-Rate Mortgages

An adjustable-rate mortgage is a home loan that begins with a fixed rate for a few years, followed by an interest rate and monthly payment that varies for the remainder of the loan's term.

For example, a three-year adjustable-rate mortgage has a fixed interest rate and monthly payment for the first three years. After that, the interest rate and monthly payment may increase or decrease each year, depending on current rates at the time.

This is different from a fixed-rate mortgage where the interest rate and monthly payment remain the same for the entire term.  For example, a 30-year fixed-rate mortgage has the same interest rate and monthly payment until it has been paid off at 30 years.

The choice between a fixed-rate mortgage or an adjustable-rate mortgage (ARM) is an important decision to make, and will depend on your personal situation and your risk tolerance.

Because a fixed-rate mortgage has the same interest rate and monthly payment until it is paid off, it is an excellent choice for simplicity and stability over the years.

An adjustable-rate mortgage provides a lower interest rate and monthly payments at first, but this lower rate applies only for the first few years of the loan—three, five, seven or ten years.

After that initial period, your interest rate and monthly payment may increase or decrease each year, depending on current interest rates at that time.

Since future interest rates are unknown, with an ARM you could end up with higher monthly payments later. If rates drop in the future, your monthly payments would decrease.

Star One's unique Mortgage Rate Modification program allows you to modify your ARM at a future date so that it becomes a fixed-rate mortgage. For a low fee, you can lock in the current fixed rate at that time—with no need for a complicated refinance.

Most adjustable-rate mortgages (ARMs) at Star One can increase or decrease every year after the initial fixed-rate period.

For example, our 3-year ARM begins with a fixed rate for the first three years, and can increase or decrease every year after that.

Similarly, our 7-year ARM begins with a fixed rate for seven years. After that, the rate can increase or decrease every year.

An exception is our 5/5 ARM, which can increase or decrease every five years—instead of every year. The 5/5 ARM begins with a fixed rate for the first five years.

A 3-year ARM is a 30-year mortgage loan that has a fixed interest rate for the first three years.

After three years, the interest rate and monthly payment may increase or decrease every year—depending on current interest rates at the time.

3-year ARMs (Adjustable-Rate Mortgages) are popular with buyers who plan to move or refinance before future rate increases become significant.

For the first three years, you'll have a lower interest rate and monthly payment than a fixed-rate mortgage.

After that, the interest rate and monthly payment may increase or decrease each year, depending on current interest rates at those times.

With a 3-year ARM, you'll save in the short term with lower monthly payments for the first three years. However, future interest rates are unknown, so you could end up with higher monthly payments in the future.

For an ARM with a longer fixed-rate period before rates can increase or decrease annually, consider our 5-year ARM, 7-year ARM or 10-year ARM.

Looking for fewer interest-rate changes over the years?

For fewer interest-rate changes over the years, our 5/5 ARM is a mortgage loan that can increase or decrease only every five years—instead of every year. The 5/5 ARM begins with a fixed rate for the first five years.

The 5/5 ARM is a 30-year mortgage loan that has a fixed interest rate for the first five years.

After five years, the interest rate and monthly payment may increase or decrease every five years—depending on current interest rates at the time.

With rate changes only every five years, the 5/5 ARM is more stable than most ARMs. With most ARMs, the interest rate can change every year after the initial fixed-rate period.

Star One offers first-mortgage loans for primary residences with a down payment as low as 3%.

Loans with less than 20% down payment typically require PMI (Private Mortgage Insurance).

First mortgage for primary residences—single-family homes, condominiums and townhomes:

• 3% down payment: loans up to $1,249,125 (97% LTV)
• 5% down payment: loans up to $1,500,000 (95% LTV)
• 10% down payment: loans up to $2,000,000 (90% LTV)
• 15% down payment: loans up to $2,500,000 (85% LTV)
• 20% down payment: loans up to $3,000,000 (80% LTV)
• 25% down payment: loans up to $3,500,000 (75% LTV)
• 30% down payment: loans up to $5,000,000 (70% LTV)
• Cash out is available for refinance transactions with at least 20% down payment (up to 80% LTV)

First-time homebuyers:

• 3% down payment: loans up to $1,249,125 (97% LTV)
• 5% down payment: loans up to $1,500,000 (95% LTV)
• Ask a Loan Officer or Member Service Representative about lower mortgage insurance premiums and discounted appraisal fee

First mortgage for 2-4 unit primary residences:

• 20% down payment: loans up to $3,000,000 (80% LTV)
• 25% down payment: loans up to $3,500,000 (75% LTV)
• 30% down payment: loans up to $5,000,000 (70% LTV)
• Cash out is available for refinance transactions with at least 20% down payment (up to 80% LTV)

First mortgage for secondary residence or vacation home (single-family only):

• 30% down payment: loans up to $2,000,000 (70% LTV)
• Single-family residence only—purchase or limited cash-out refinance option