Also called ARMs, adjustable-rate mortgages have a unique interest rate feature that changes, or adjusts, over the life of the home loan. An ARM may be attractive to you if you desire a slightly lower interest rate during the initial stages of owning your home, if you expect that your income will rise in the future, and/or if you are not planning to stay in the same home for long. Also, an ARM may have an initial interest rate lower than a fixed-rate home loan.

Depending on your home loan requirements, your initial payments will be at a fixed interest rate. Afterwards, your interest rate will be adjusted by adding a pre-determined margin to a specific index like Treasury bills or LIBOR (London Inter Bank Offered Interest Rate Index). ARMs are generally referred to as 1/1, 3/1, 5/1, 7/1 and/or 10/1 – this means that the initial fixed interest rate period is for 1, 3, 5, 7 or 10 years, respectively, and then the rate is adjusted every year for the life of the home loan. In addition to the initial interest rate adjustment period mentioned above, there are other types of ARMs, including:

• FHA Loans:  FHA home loans are insured by the Federal Housing Administration (FHA) and are popular with first-time home buyers as they feature flexible down payment and credit requirements.
• Jumbo Loans:  Jumbo loans are specific adjustable-rate home loan programs and are designed for homes priced $417,000 to over a million dollars.
• Interest-Only ARMs:  these variable rate home loans have an interest-only payment for a fixed period over the life of the home loan.

First Horizon offers many more ARM programs, so check with your Relationship Manager for details.