back
Back to dictionary

Dec 16, 2022

Adjustable Rate Mortgage

Commonly known as an ARM, is a type of mortgage that has an interest rate that adjusts periodically based on changes in a financial index. The interest rate may go up or down, affecting the borrower's monthly mortgage payments. ARMs are typically offered with a fixed rate for an initial period, after which the rate adjusts regularly.

What is an ARM?

An ARM is a mortgage that has an interest rate that can change over time. The interest rate is typically fixed for a set period, such as five or seven years, and then adjusts periodically based on a predetermined index, such as the prime rate or the London Interbank Offered Rate (LIBOR). The adjustment can result in a higher or lower interest rate, which can affect the monthly mortgage payments.

How does an ARM work? 

An ARM has several key features that distinguish it from a traditional fixed-rate mortgage:

  1. Initial Fixed Rate: The interest rate on an ARM is fixed for an initial period, such as five or seven years. The interest rate does not change, and the monthly mortgage payment remains constant.

  2. Adjustment Period: After the initial fixed period, the interest rate can adjust periodically, typically once a year. The adjustment is based on a predetermined index and can result in a higher or lower interest rate.

  3. Caps: Most ARMs have caps that limit how much the interest rate can increase or decrease in a given period. There are typically two types of caps: a periodic cap, which limits the amount the interest rate can change from one adjustment period to the next, and a lifetime cap, which limits the total amount the interest rate can change over the life of the loan.

Advantages of ARMs for real estate investors 

ARMS can offer several advantages to real estate investors, including:

  1. Lower Initial Payments: ARMs often have lower initial payments than traditional fixed-rate mortgages, which can make them more affordable for real estate investors and may be particularly beneficial for investors who plan to sell the property before the initial fixed period ends.

  2. Flexibility: ARMs can provide greater flexibility for real estate investors who may need to sell or refinance the property before the end of the initial fixed period. If interest rates are low, investors may be able to take advantage of lower rates to refinance the mortgage and reduce their monthly payments.

Disadvantages of ARMs for real estate investors

ARMS can also have some disadvantages for real estate investors, including:

  1. Uncertainty: The uncertainty of not knowing how much the monthly mortgage payment will be after the initial fixed period can be a disadvantage for some investors. If interest rates rise significantly, the monthly payment could increase substantially.

  2. Risk: ARMs can be riskier than traditional fixed-rate mortgages, as the interest rate can adjust upward, potentially resulting in a higher monthly payment. This risk is particularly significant if interest rates rise rapidly, which can make it difficult for investors to afford the mortgage payment.

An adjustable-rate mortgage is a type of mortgage in which the interest rate can change over time. 

ARMs can offer lower initial payments and greater flexibility for real estate investors but also come with uncertainties and risks. Investors should carefully consider the pros and cons of an ARM and evaluate their financial situation before deciding whether this type of mortgage is right for them.

Landa
Scan to
download
App StorePlay Store
  • Medium
  • Reddit
  • Discord
  • Twitter
  • Instagram
  • Facebook
  • LinkedIn

All Rights Reserved © Landa Holdings, Inc

Landa Holdings, Inc. ("Landa Holdings") operates the www.landa.app website (the "Site") and the Landa mobile application (the "App")(collectively, the “Platform”). Landa Holdings manages Landa App LLC, Landa App 2 LLC and Landa App 3 LLC (“Landa Issuers”), and raises funds and facilitates the issuance of shares for the Landa Issuers entities through the Platform pursuant to Regulation A under the Securities Act of 1933 (“Regulation A”).

Neither Landa Holdings nor any of its affiliates are a registered broker-dealer or investment advisor. All securities-related activity for the Landa Entities is conducted through Dalmore Group LLC (“Dalmore”), a registered broker-dealer and member of FINRA/SIPC, You can review Dalmore's brokercheck for Dalmore.

Landa is not a bank. Certain services are offered through Synapse Financial, Inc. and its affiliates (collectively, “Synapse”). Synapse is not a bank and is not affiliated with Landa. Brokerage accounts and cash management programs are provided through Synapse Brokerage LLC (“Synapse Brokerage”), an SEC-registered broker-dealer and member of FINRA and SIPC. Additional information about Synapse Brokerage can be found on FINRA’s BrokerCheck.

See Synapse Terms of Service, Privacy Policy, and the applicable disclosures and agreements available in Synapse’s Disclosure Library for more information.

Synapse Brokerage LLC has a direct or indirect business relationship with Program Banks for the placement of deposits in the cash management program. The list can be found in the List of Program Banks.

Further, Landa Management LLC, a wholly-owned subsidiary of Landa Holdings, manages Landa Financing LLC (“Landa Financing”), and raises funds and facilitates the issuance of shares for Landa Financing through the Platform pursuant to Regulation A. All securities-related activity for Landa Financing is conducted through Dalmore Group LLC (“Dalmore”), a registered broker-dealer and member of FINRA/SIPC (for more information on Dalmore, review Dalmore’s brokercheck.

You should speak with your financial advisor, accountant, and/or attorney when evaluating any offering of securities. Neither Landa Holdings, Landa App, nor Dalmore makes any recommendations or provides advice about investments, and no communication, through this website or in any other medium, should be construed as a recommendation for any security offered on or off this investment platform. Nothing in this material should be construed as investment or tax advice, or a solicitation or offer, or a recommendation to buy or sell any securities. The Site and/or the App may make forward-looking statements. You should not rely on these statements but should carefully evaluate the offering materials in assessing any investment opportunity, including the complete set of risk factors that are provided as part of the offering circular for your consideration.  We urge you to review the applicable offering circular, available here.

All securities offered by the Landa Entities and Landa Financing are deemed “Shares”. Investing in Shares involves risks, and there is always the potential of losing money when you invest in Shares. Past performance is no guarantee of future results. Investments in Shares are speculative and involve substantial risks to consider before investing, outlined in the respective offering materials and including, but not limited to, illiquidity, lack of diversification, and complete loss of capital. An investment in Shares constitutes only an investment in a particular offering and not in Landa Holdings, Landa App, or any of the underlying asset(s). Investors should carefully review the risks located in the respective offering materials for a more comprehensive discussion of risks.

No money or other consideration will be solicited (and if sent, will not be accepted), and no offer to buy Shares of a particular offering can be accepted, and no part of the purchase price can be received until an offering statement filed with the Securities and Exchange Commission (the "SEC") relating to those Shares has been qualified by the SEC. Any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of acceptance given after the date of qualification by the SEC. An indication of interest involves no obligation or commitment of any kind.

Investment overviews contained on the Platform contain summaries intended for informational purposes only and are not complete. For detailed information, we urge you to refer to the applicable offering circular filed with the SEC. Neither Landa Holdings nor any of its affiliates offers refunds after an investment has been made.

You should speak with your financial advisor, accountant, and/or attorney when evaluating any Shares. None of Landa Holdings or its affiliates, Dalmore makes any recommendations or provides advice about Shares, and no communication, through this website or in any other medium, should be construed as a recommendation or investment advice. Nothing on the Platform should be construed as investment or tax advice, or a solicitation or offer, or a recommendation to buy or sell any securities.The Platform may make forward-looking statements. You should not rely on these statements but should carefully evaluate the offering materials in assessing any investment opportunity, including the complete set of risk factors that are provided as part of the offering circular for your consideration. We urge you to review the applicable offering circular, available here.

All Shares will be issued in electronic form only and will not be listed or quoted on any securities exchange. After a Series’ offering has concluded, we expect that the Public Private Execution Network Alternative Trading System, or PPEX ATS (the “Secondary Trading Platform”), which is registered with the SEC and operated by North Capital Private Securities Corporation (“North Capital”), will be the only venue available for the resale of Shares. Resales of Shares will be conducted by Dalmore, as a broker-dealer member of the Secondary Trading Platform; provided, however, any such resale of Shares will be subject to federal and state securities laws and the restrictions in the Series’ Operating Agreement, and there can be no assurance that an active market for any Shares will develop on the Secondary Trading Platform, that the Secondary Trading Platform will be available to allow resales of Shares to residents of all states, or that the Secondary Trading Platform will be available at all. For these reasons, investors must be prepared to hold their Shares indefinitely.


Disclaimers

Landa Holdings maintains this website for informational purposes only. All offerings of Series’ Shares (and information about each Series and its underlying property) are conducted exclusively on the Landa Mobile App.


All images and figures shown are for illustrative purposes only and are not actual customer or model returns. Landa is not a cryptocurrency app, all monetary values are in U.S dollars and available only to U.S. investors. All Rights Reserved © Landa Holdings, Inc.