Key Features about Adjustable Rate Mortgage Loans
Overview of an Adjustable Rate Mortgage (ARM)
What is an adjustable rate mortgage? This type of mortgage has a “floating” interest rate that changes according to specific criteria. The initial interest rates on adjustable-rate mortgages are usually fixed for a specific period of time. After the “introductory” period the rate is adjusted periodically—quite often this is on a monthly basis. The borrower will pay an interest rate based on a benchmark (usually the prime rate) plus an additional amount. This is called an ARM margin.
Adjustable-rate mortgage loans are also called variable rate or floating rate mortgages.
The Best Candidates for ARMs
Not everyone is a good candidate for an adjustable interest rate mortgage. ARMs are best suited for those in the following situations:
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Features of an Adjustable Rate Mortgage
There are several good reasons a person might want to apply for a bad credit mortgage refinance.