15/15 ADJUSTABLE-RATE MORTGAGE

A: A 15/15 adjustable-rate mortgage (ARM) is a 30-year mortgage with two 15-year rate periods. The interest rate and payment are fixed for the first 15 years, and is significantly lower than our 30-year fixed-rate mortgage. The rate adjusts once at the end of year 15 and then remains fixed for the final 15 years.

A: The interest rate adjusts only once during the 30-year loan term. The rate change occurs after the first 15 years.

A: There is a 6% lifetime “cap” on rate increases. This means your loan can increase by up to 6%. So, for example, if your rate is 5.75%, the maximum amount it can adjust to at the 15-year adjustment period is 11.75%.

A: Yes. If at the time of adjustment, the index rate and margin combined are lower than your current rate, your rate will decrease. However, the lowest rate your loan can decrease to is 3.50%.

A: The new rate is determined by taking the 10-year Constant Maturity Index Rate at the time and adding a 2% margin. 

A: Your monthly payment remains fixed during the first 15 years because your interest rate is fixed. Your total housing payment might still change if property taxes, homeowners insurance, mortgage insurance, homeowners association dues, or other housing expenses change.

A: Your interest rate adjusts one time based on the current market index, margin, and rate cap. LAPFCU then calculates a new payment based on the adjusted rate, remaining loan balance, and mortgage terms. After that adjustment, your new rate remains fixed for the remaining 15 years of the loan.

A: A 30-year fixed-rate mortgage keeps the same rate for the entire loan term. A 15/15 ARM starts with a lower introductory rate, which remains the same for 15 years. The rate adjusts once, and then remains fixed again for the remaining 15 years. Your rate might decrease at the 15-year adjustment.

A: A 15/15 ARM offers a longer initial fixed period and only one rate adjustment. This means payments are more stable than an ARM that begins adjusting after five, seven, or ten years and continues adjusting at regular intervals. All adjustable-rate mortgages still involve the risk of a future rate and payment increase.

A: A 15/15 ARM might be an excellent option if you:

• Want lower payments for the first 15-years of home ownership 
• Want to refinance and lower your current rate and monthly payment 
• Want to explore a lower initial rate than a 30-year fixed-rate mortgage 
• Expect to sell, refinance, relocate, or retire before the adjustment 
• Plan to make additional principal payments 
• Expect your income or financial position to grow 
• Want long-term stability without committing to one interest rate for 30 years 
• Understand your payment might increase after the adjustment

A: A 15/15 adjustable-rate mortgage (ARM) offers a good mix of payment stability and flexibility. For many police officers, sheriff’s deputies, and other law enforcement professionals, it fits both their career and financial goals.

• Lower Starting Rate: A 15/15 ARM starts with a lower interest rate than a 30-year fixed mortgage. That means a lower monthly payment during the first 15 years. 
• Long-term Stability: The interest rate stays fixed for 15 years. Unlike with shorter term ARMs, the payment does not change every few years. 
• Only One Adjustment: After the initial 15-year fixed period, the interest rate adjusts once and then remains fixed for the rest of the loan term. That offers more predictability than ARMs with frequent adjustments. 
• Fits Law Enforcement Careers: Officers, deputies, dispatchers, and civilian professionals often promote, transfer, retire, or relocate within 15 years. If you expect to sell, refinance, or pay off your mortgage before the adjustment, you could benefit from the lower initial rate without ever reaching the adjustment period. 
• Keeps More Money in Your Budget: Lower monthly payments during the fixed period leave more room for retirement savings, emergency funds, children’s education, or paying down other debt.

A: When you sell the property, the remaining mortgage balance is usually paid from the sale proceeds. You would not experience the scheduled rate adjustment if the loan is paid off before the end of the first 15 years.

A: Yes. There is no prepayment penalty, so you can refinance whenever it makes financial sense.

A: Yes, it can be. The lower initial rate may improve affordability and reduce monthly payments during the first 15 years of homeownership.

A: Yes. A 15/15 ARM might help you lower your monthly payment or reduce your starting interest rate. You might consider refinancing to: 

• Get a lower interest rate 
• Reduce your monthly payment 
• Change from another adjustable-rate mortgage 
• Access a longer initial fixed-rate period 
• Consolidate qualifying mortgage debt 
• Adjust your loan term or payment structure

A: An LAPFCU Mortgage Loan Officer will guide you through each step of the mortgage process, from application through closing. They will: 

1. Review your homeownership goals. 
2. Compare the 15/15 ARM with other mortgage options. 
3. Help you complete your application and submit supporting documents.

LAPFCU will not sell your loan's servicing rights to a third party company. We will service your mortgage for the life of the loan.