Can I afford the loan payment if the interest rate on the ARM loan increases?
ARM’s offer lower interest rates than a fixed-rate mortgage in the early years of the loan. This provides lower monthly payments that are especially attractive to first time home buyers and home owners looking to buy a larger home. A fixed-rate mortgage has an interest rate that will never change during the term of your loan. An ARM offers a lower initial interest rate than fixed-rate loans, however the loan rate and monthly payment will adjust higher or lower depending upon market conditions. The frequency of the interest rate and payment changes are stipulated in the mortgage contract. The amount of the first change for the ARM is based on an index (usually a treasure security) and a margin (a percentage over the start rate). Both are included in the loan note. Ask an advisor about how these adjustments work. After the initial fixed-rate period, the rate can change annually. There is also a lifetime interest rate cap that gives you peace-of-mind because you will know your maximum int
ARM’s offer lower interest rates than a fixed-rate mortgage in the early years of the loan. This provides lower monthly payments that are especially attractive to first time home buyers and home owners looking to buy a larger home. A fixed-rate mortgage has an interest rate that will never change during the term of your loan. An ARM offers a lower initial interest rate than fixed-rate loans, however the loan rate and monthly payment will adjust higher or lower depending upon market conditions. The frequency of the interest rate and payment changes are stipulated in the mortgage contract. The amount of the first change for the ARM is based on an index (usually a treasure security) and a margin (a percentage over the start rate). Both are included in the loan note. Ask an advisor about how these adjustments work. After the initial fixed-rate period, the rate can change annually.
