An adjustable-rate mortgage, or ARM, is a home loan with an interest rate that can change periodically. This means that the monthly payments can go up or down. Generally, the initial interest rate is lower than that of a comparable fixed-rate mortgage. After that period ends, interest rates – and your monthly payments – can go lower or higher.
Although many people simply dismiss their utility, I can think of three reasons why an ARM may be better than a fixed-rate mortgage. 1. Lower rates help you build equity faster The obvious advantage.
For an adjustable-rate mortgage, the index is a benchmark interest rate that reflects general market conditions and the margin is a number set by your lender when you apply for your loan. The index and margin are added together to become your interest rate when your initial rate expires.
An adjustable-rate mortgage, or ARM, has an introductory interest rate that lasts a set period of time and adjusts annually thereafter for the remaining time period. After the set time period your interest rate will change and so will your monthly payment.
The rate on your adjustable rate mortgage is determined by some market index. Many adjustable rate mortgages are tied to the LIBOR, Prime rate, Cost of Funds Index, or other index.The index your mortgage uses is a technicality, but it can affect how your payments change.
Bankrate.com provides FREE adjustable rate mortgage calculators and other ARM loan calculator tools to help consumers learn more about their mortgages.
Adjustable-Rate Mortgage (ARM) – A mortgage whose interest rate is adjusted periodically to reflect market conditions. Initial Interest Rate – Sometimes known as the teaser rate, it is the first interest rate charged on the mortgage.
What is an adjustable-rate mortgage (ARM)? It's a type of home loan with an interest rate that adjusts up or down with other U.S. interest rates. ARM rates.
DEFINITION of ‘Adjustable-Rate Mortgage – ARM’. An adjustable-rate mortgage (ARM) is a type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan. Normally, the initial interest rate is fixed for a period of time, after which it resets periodically, often every year or even monthly.
3 Year Arm Rates Adjustable Rate Mortgages Defined – The Mortgage Professor – If the rate difference between the 5-year ARM and the comparable 30-year FRM is 1% or more, as was the case in much of 2003, the savings over 5 years might justify the risk. If the rate difference is only .25%, as was the case in November 2006 when this article was revised, the borrower might well decide to take the FRM and be safe.Sub Prime Mortgage Meltdown What Was the subprime mortgage crisis and How Did it Happen. – The subprime mortgage crisis, which guided us into the Great Recession, has many parties that can share blame for it. For one, lenders were selling these as mortgage-backed securities.
An adjustable rate mortgage, or ARM, is a home loan that offers an initial period of a fixed interest rate for home buyers. After a certain amount of time, usually 3.