What is a 1 Year Adjustable Rate Mortgage?
This is a 30 year loan in which the rate (and therefore your monthly payment) changes every 12 months on the anniversary of your loan. The amount of the rate change (referred to as an Adjustment), is determined by a mathematical formula based on the U.S. bond market (most typically the yield on the 1 Year U.S. Treasury Bill). Your lender does not control this number, so it is safe to assume that your adjustment will be fairly determined (though you should always verify your new rate by comparing with published numbers). This loan is considered quite risky since your payment may change significantly from year to year. In exchange for taking this risk, the borrower is rewarded with an initial rate that is significantly below market rates for 30 Year Fixed Rate Mortgages. Even after the loan adjusts, your new rates will typically be below those rates being offered to new borrowers for the 30 Year Fixed Rate program. In periods of rising interest rates, it is very possible that you will ul
