As the housing market continues to challenge both buyers and sellers, many are seeking alternatives to traditional fixed-rate mortgages. One such option growing in popularity is the Adjustable Rate Mortgage (ARM). At Dover Federal Credit Union, we provide tailored ARM options to meet various financial needs and homeownership goals. If you're a first-time buyer or looking to refinance, our 5/5 and 10/10 ARMs offer unique advantages that make homeownership more attainable.

What is an Adjustable Rate Mortgage (ARM)?

An Adjustable Rate Mortgage (ARM) is a home loan where the interest rate is fixed for an initial period and then adjusts periodically. For example, with Dover Federal Credit Union's 5/5 ARM, the interest rate remains fixed for the first five years, after which it adjusts every five years. Similarly, the 10/10 ARM locks in a low fixed rate for ten years, followed by adjustments every decade.

ARMs are ideal for homeowners seeking flexibility and potentially lower payments, particularly during the early years of the mortgage. This structure allows borrowers to benefit from lower initial rates, which can be a critical factor in today's high-rate environment.

Dover Federal Credit Union 5/5 ARM: The Perfect Balance Between Stability and Flexibility

Key Features:

• Low fixed rate for the first five years, providing predictability and affordability.
• Adjusts every five years after the initial period, allowing you to potentially take advantage of future rate decreases.
• Caps on adjustments: Increases are limited to 2% per adjustment period with a lifetime cap of 5%.
• Fully amortized over 30 years, meaning consistent repayment over the loan term.
• No pre-payment penalty, giving you the freedom to pay off the mortgage early without extra costs.
• Primary residences and second homes are eligible, making it a versatile option for various property types.

The 5/5 ARM is especially beneficial if you anticipate staying in your home for less than 10 years or expect a rise in your income. The five-year adjustment period provides ample time to adapt to market changes or to refinance into a different loan structure.

Dover Federal Credit Union 10/10 ARM: Long-Term Peace of Mind with Predictable Payments

Key Features:

• Fixed rate for ten years, offering long-term stability before any adjustments.
• Adjusts only twice over 30 years, significantly reducing the frequency of rate changes and financial uncertainty.
• Caps on adjustments: The rate can only increase by 3% in the 11th year, with a lifetime cap of 5%.
• Fully amortized over 30 years ensures that your payments are spread out evenly across the loan term.
• No pre-payment penalty, allowing you to pay off your loan early without incurring additional fees.
• Available for single-family homes, condos, and planned unit developments (PUDs).

The 10/10 ARM from Dover Federal Credit Union is an excellent choice if you seek long-term predictability but want the potential to benefit from lower rates in the future. This option is particularly appealing for those who plan to stay in their home for at least a decade or more.

Why Choose an ARM from Dover Federal Credit Union?

1. Lower Initial Payments: The lower starting interest rates of ARMs can make homeownership more affordable in the short term, which is crucial in today's competitive housing market.
2. Rate Caps for Protection: Both the 5/5 and 10/10 ARMs have rate caps, ensuring that your interest rate won't increase drastically. This safety net provides peace of mind by preventing unaffordable payment hikes.
3. No Pre-Payment Penalties: Dover Federal Credit Union's ARMs come with no penalties for paying off your mortgage early. This flexibility allows you to make extra payments or refinance without financial penalties.
4. Diverse Property Options: Whether you're buying a single-family home, a condo, or a PUD, our ARM products are designed to accommodate various property types.
5. Closing Cost Assistance: We offer assistance with closing costs, making the transition to homeownership even smoother.

When to Consider an Adjustable Rate Mortgage

ARMs are particularly advantageous for certain scenarios:

• Short-Term Homeownership: If you plan to move within a few years, an ARM can save you money on interest payments.
• Anticipated Income Growth: If you expect your income to increase, starting with a lower payment can free up cash flow for other investments or expenses.
• Refinancing Flexibility: If you're looking to refinance out of an existing mortgage, an ARM could offer a lower interest rate and payment.

ARM vs. Fixed-Rate Mortgages: Weighing Your Options

While fixed-rate mortgages offer stability with a constant interest rate over the life of the loan, they may come with higher rates initially. In contrast, ARMs provide lower initial rates, which can make homeownership more affordable in the early years. However, it's important to consider the potential for rate increases after the fixed period ends.

Dover Federal Credit Union can help you evaluate which option aligns best with your financial goals. Our experienced mortgage advisors are available to guide you through the decision-making process.

The Dover Federal Credit Union Advantage

As a member-focused credit union, Dover Federal Credit Union is committed to helping you achieve your homeownership dreams. Our ARM products are designed with your financial wellness in mind, providing both flexibility and stability. Plus, with no pre-payment penalties and closing cost assistance, we make the journey to owning a home more manageable.

Frequently Asked Questions

1. What is the difference between a 5/5 ARM and a 10/10 ARM?

• The 5/5 ARM adjusts every five years after the initial fixed period, while the 10/10 ARM adjusts only twice over 30 years, offering longer periods of stability.

2. Are there any penalties for paying off my ARM early?

• No, Dover Federal Credit Union's ARMs have no pre-payment penalties, allowing you to pay off your loan early without extra fees.

3. What are the rate caps on Dover Federal Credit Union's ARMs?

• The 5/5 ARM has a 2% cap per adjustment with a 5% lifetime cap. The 10/10 ARM has a 3% cap in the 11th year and a 5% lifetime cap.

4. Can I use an ARM to finance a second home?

• Yes, both the 5/5 and 10/10 ARMs are available for primary residences and second homes.

5. What property types are eligible for Dover Federal Credit Union’s ARMs?

• Eligible properties include single-family homes, condos, and PUDs.

6. How does closing cost assistance work with Dover Federal Credit Union's ARMs?

• We offer various programs to assist with closing costs, helping to reduce the upfront expenses associated with purchasing a home.

Conclusion

Adjustable Rate Mortgages (ARMs) from Dover Federal Credit Union present an excellent opportunity for homebuyers looking for flexibility, lower initial payments, and long-term financial planning. Whether you choose the 5/5 or 10/10 ARM, our products are designed to suit a variety of needs and property types. Contact us today to learn more about how an ARM could be the perfect fit for your home financing needs.

Dover Federal Credit Union

For 66 years, Dover Federal Credit Union has served as a member-owned financial cooperative, designed to provide access to equitable financial products and services that create stability and lead to establishing generational wealth.  Today we serve over 44,000 members, encompassing the military, Delaware families and Workplace Partners. Serving Camden, Dover, Middletown, Milford & the New Castle areas in branch & online.