adjustable rate VA mortgage loans

VA Loans

Guide to Adjustable Rate VA Mortgage Loans

VA mortgage loans are a popular option for military borrowers who need funds to purchase a home. Not only do VA loans have great rates, but they can also be obtained with no money down. Additionally, there are different types of loan options that VA borrowers can choose from. Fixed-rate loans are the most common, but adjustable-rate loans can be an excellent option as well! Below, we’ve provided some information about adjustable-rate VA loans. 


What Is an Adjustable-Rate VA Loan?

An adjustable-rate VA loan is a type of mortgage loan reserved for military borrowers that is backed by the Department of Veterans Affairs. These loans have an interest rate that can change over time, hence the term “adjustable.” 

Unlike a fixed-rate mortgage, where the interest rate stays the same for the entire term of the loan, an adjustable-rate VA loan typically starts with a lower interest rate that is fixed for a certain period of time (often 3, 5, 7, or 10 years). After that initial period, the interest rate can adjust up or down based on market conditions and other factors.


Benefits of ARM Loans for VA Borrowers

Even though they’re less common than fixed-rate mortgages, Adjustable Rate Mortgage (ARM) loans can be a great option for military borrowers. Some of the benefits include:


Lower Initial Interest Rate

ARM loans often have lower initial interest rates than those for fixed-rate mortgages. This can work out to the advantage of a military borrower since military families tend to move around. If you don’t plan on living in the home for more than two or three years, an ARM could be a good option for you. You could sell the home before the initial interest rate period expires and avoid any potential rate changes.


Pay Down Principal

Having an ARM mortgage could also allow you to pay down more of your principal balance. With a lower initial interest rate, you’ll be paying less in interest and more toward the principal. Paying down your principal could help you save money on interest over the long run. 


Future Savings

Adjustable-rate VA mortgage loans also allow borrowers to take advantage of future market changes. If interest rates drop in the future after your fixed period has ended, your lender will adjust your rate. Your monthly payment will go down, which can help you save money.

That being said, it is important to keep in mind, if rates go up after your fixed period has ended, yours will go up too. You’ll end up paying a higher monthly amount during these spikes. The good news is there is a cap on how much your interest rate can go up. Usually, ARMs are capped at an increase of about 5-6% above the initial interest rate. 


Learn More about Adjustable-Rate VA Mortgage Loans

If you’re interested in learning more about adjustable-rate VA mortgage loans, please do not hesitate to contact our office. Our staff will be more than happy to assist you!