Freddie Mac Adjustable-Rate Mortgages (ARM)
Ideal product for borrowers who want to take advantage of lower short-term rates with prepayment flexibility
Key Benefits
- Convertible to a new Freddie Mac fixed-rate or fixed-to-float mortgage at any time after lockout with streamlined underwriting
- Flexible choice of indices
- Choice of interest rate cap coverage
- Four prepayment provision options available
At-a-Glance
| Product Summary | |
| Index Choices | 1-month or 3-month Freddie Mac Reference Bills® index or a 1-month or 3-month LIBOR index |
| Prepayment Options | Four prepayment options available (see chart below) |
| Spread Lock | Early spread lock for 60 or 120 days available |
| Loan Terms | 5, 7, and 10 year |
| Interest-Only Period | Partial interest-only and full term interest-only available |
| Interest Rate Cap | Choice of the Freddie Mac Embedded Interest Rate Cap or you may obtain your own cap coverage from a third-party provider; no cap necessary for loans less than 60% LTV |
Prepayment Provisions
You can choose from four prepayment provisions when structuring Freddie Mac standard, capped or uncapped ARMs. The fourth option is only available for a 10-year capped ARM. Each option offers no prepayment premium for the last 90 days of the loan term.
| Prepayment Premium | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 | Year 8 |
|---|---|---|---|---|---|---|---|---|
| Option 1 | Locked out | 1%; waived if converted |
-- | -- | -- | -- | -- | -- |
| Option 2 | 3% | 2% | 1% | If > 4, waived if converted | -- | -- | -- | -- |
| Option 3 | 5% | 4% | 3% | 2% | 1% | If > 6, waived if converted | -- | -- |
| Option 4 (10 yr capped ARM) |
7% | 6% | 5% | 4% | 3% | 2% | 1% | If > 8, waived if converted |
Maximum Loan-to-Value Ratio and Minimum Amortizing1 Debt Coverage Ratio
| ARM | LTV/DCR (at max note rate) | ||
|---|---|---|---|
| Amortizing | Partial Interest-Only | Interest-Only (using amortizing payment) | |
| Acquisition and No Cash-Out Refinance | |||
| > 7 Year Term | 80% / 1.05x | 80% / 1.05x | 65% / 1.10x |
| < 7 Year Term | 70% / 1.05x | 60% / 1.10x | 60% / 1.10x |
| Cash-Out Refinance | |||
| > 7 Year Term | 75% / 1.10x | 75% / 1.10x | 60% / 1.15x |
| < 7 Year Term | 65% / 1.10x | 60% / 1.15x | 60% / 1.15x |
1 The debt coverage ratio (DCR) calculated for the Partial Interest-Only and Interest-Only period uses an amortizing payment.
Contact Us
- Download and print Freddie Mac's contact information
PDF Version
- Download the Adjustable-Rate Mortgages term sheet
The information in this document is not a replacement or substitute for information found in the Freddie Mac Multifamily Seller/Servicer Guide. Terms set forth herein are subject to change without notice.