What is a Convertible Arm?

There are so many mortgage choices when you are purchasing or refinancing a home. One of the less prevalent options is a convertible ARM loan. This type of loan is considered a hybrid of an adjustable-rate mortgage and a fixed mortgage. Borrowers will begin their initial term of their loan, an adjustable-rate mortgage for a predetermined amount of time. After that period, they are given the choice of converting to a fixed rate or continuing as an adjustable.

Consumers utilizing this type of mortgage are betting that interest rates will fall, and they can convert to a lower fixed rate when the time is right. The initial rate is considered a teaser rate and will be attractively below the current 30-year fixed rate. After a period of 1 -5 years the option to convert will be presented and you can convert to a fixed rate for the balance of the 30-mortgage term.

The bottom line is a convertible arm is a risk and if rates rise you may lose but if rates fall you could take advantage. As of now Hall Financial does not offer a convertible arm but product offerings change as the industry shifts and changes. It is best to seek out a trusted mortgage professional like the Home Loan Advisors at Hall Financial to learn more about what mortgage options are available and what is best for you.