Adjustable rate mortgages (ARM) offer lower initial interest rates than fixed-rate mortgages. But after an initial period, those rates are adjusted to follow the market. Monthly payments on this type of loan can go up or down as the market conditions change. There are ceilings, or “rate caps”, on the amount the interest rate can rise or fall to protect you in times of extreme rate fluctuation.
You might consider an adjustable-rate mortgage if you:
A 6-month ARM offers an initial interest rate for the first 6 months, and can be adjusted every 6 months thereafter based on the applicable index.
A 3/6-month ARM’s initial rate is effective for 3 years, and can be adjusted every 6 months thereafter based on the applicable index.
1, 5, and 7 Year ARM
These mortgages maintain an initial interest rate for 1, 5, or 7 years, and can be adjusted every year thereafter based on the market conditions.
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