The VA hybrid ARM (adjustable rate mortgage) was introduced by the Veterans Administration to provide veterans with a safe way to maximize monthly savings on a mortgage payment over a short period of time. While many conventional ARMs have unrestricted monthly changes that are tied to volatile indexes, the VA hybrid loans allow for longer fixed rate periods and are adjustable once per year and by no more than 1% at a time.
The VA ARM loan can be used on purchases, cash-out refinancing, and streamline refinance transactions, and it is possible to refinance even if you have bad credit. There are a lot of benefits that come from using this program, and we can help you determine whether it is right for you.
Benefits of the VA Hybrid ARM
- Lower monthly payments
- VA guarantee on the loan makes it easier to acquire
- Money saved each month can be applied to other debt or to the principle of the loan creating more equity
- Lower interest rates
- No prepayment penalty on any VA loan.
- If your ARM loan starts to adjust beyond acceptable levels you can always streamline refinance into a fixed rate later
Types of Loans
The VA offers two types of Hybrid ARM loans, the VA 3 year ARM and the VA 5 year ARM. This refers to the number of years the interest rate is fixed before it can be adjusted, and there are some benefits to each.
3-Year VA ARM – The 3-year loan was introduced as a way to help veterans by giving the homeowner the chance to lower their interest rates and dramatically reduce their monthly payments. After the three years are up, the rate will change based on the index at the time of adjustment, but it will have a cap of 1% per year with a life cap of 5%.
5-Year VA ARM – The interest rates on 5-year ARMs are usually 1%-1.5% lower than a conventional mortgage which can save you a lot of money. You can save hundreds on your mortgage payment, receive a cash refund of your escrow account, and significantly reduce your monthly payments. If you are planning on selling or refinancing your home in less than eight years, this is a great option because it guarantees the fixed rate for a longer period.
The VA ARM loan is also a great option for jumbo loans. Saving an extra 1-2% over a 30 year mortgage on a loan above $417,000 can save hundreds and hundreds of dollars per month.
“I was nervous about getting a VA 3 year ARM at first. I guess I just didn’t understand how they worked. I had seen all of the media coverage of the mortgage meltdown and the risky ARM loans caused it all. I didn’t know that there was a difference between a VA ARM and all of the other ARM loans. Once the program was explained to me in detail I understood that there was built-in security because of the way it was designed and that by taking advantage of the VA streamline arm program I was able to get a very easy refinance done that saved me hundreds of dollars per month.”
Tony, Dallas, TX
If you would like to know more about your qualifications for a 3- or 5-year ARM simply fill out the form and get the process started today.