Also called ARMs, adjustable rate mortgages have a unique interest rate feature that changes, or adjusts, over the life of the 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 loan.

Depending on your loan's 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 adjustment period mentioned above, there are other types of ARMs, including:

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

First Horizon offers many more ARM programs, so check with your relationship manager for details.