The VA ARM
(Adjustable Rate Mortgage)
The VA Adjustable rate loan provides for an initial fixed interest rate for a period of three or five years, and then adjusts annually after the initial fixed period. The 3/1 and 5/1 VA ARM products allow a 1% annual interest rate adjustment after the initial fixed interest rate period, and a 5% interest rate cap over the life of the loan. Interest rate adjustments must occur on an annual basis, except for the first adjustment which may occur no sooner than 36 months from the date of the borrower's first mortgage payment on the 3/1 ARM or 60 months from the date of the borrower's first payment on the 5/1 ARM. The loan term is 30 years for either of these loans.
INDEX AND MARGINS
The index is the weekly average yield on U.S. Treasury Securities adjusted to a constant maturity of one year. Also known as the 1-Year Constant Maturity Index. VA ARM loans have either a 2.00% margin or a 2.25% margin.
Initial Note rate plus 5%
One percent (1%) annually after the initial fixed rate period of 3 or 5 years.
FIRST ADJUSTMENT DATES
Government loans only adjust 4 times per year (January 1, April 1, July 1, and October 1). The loan's first adjustment will occur with the corresponding adjustment period that follows the initial fixed period. For example, if the initial period ends in February, the rate will adjust in April and then annually thereafter until maturity.
3/1 VA Hybrid ARM: the first rate adjustment will occur between the 36th and the 42nd payment due date.
5/1 VA Hybrid ARM: the first rate adjustment will occur between the 60th and the 66th payment due date.
Initial Note Rate