Adjustable Rate Mortgage

What is an adjustable rate mortgage?

Adjustable rate mortgages are gaining popularity in throughout the nation. An ARM as it is commonly referred to, has an interest rate that adjusts or changes depending on market conditions. This adjustable interest rate can increase or decrease your monthly payment. ARM's have provisions or caps that limit change in interest rate, how often the rate can change, and how much over the life of the mortgage. The lender also collects property taxes, hazard insurance, and mortgage insurance with the monthly payment. A change in taxes or insurance can also change the monthly mortgage payment.

Terms of 30 years are available with an initial fixed rate period. After the initial period, the interest rate can change every 1, 6, or 12 months. Many lenders have an interest only payment during the initial period. Pricing for adjustable rate mortgages is based on US Treasury bonds or the LIBOR, COFI, and MTA indexes. Adjustable rate mortgage loans are available for:

"Tip"

Consider this option when residing in a home for only a short period of time- rates are much lower than fixed rate mortgages.