An adjustable rate mortgage (ARM) has an interest rate that fluctuates periodically. This is in contrast to a fixed rate mortgage, which always has the same interest rate.
Every ARM has basic components:
An ARM’s interest rate is tied to one of many economic indices, some examples of which are the 1-year constant maturity Treasury security, the Cost of Funds Index, or the London Interbank Offered Rate. Different indices move at different rates so know the characteristics of the index used for your ARM.
The interest rate for your ARM will be calculated by adding a margin to the interest rate from the index. The margin is basically the markup charged by the lender that allows them to make a profit off of your loan, such as adding 2% to the index, where the 2% is the margin. The margin of your loan usually does not fluctuate.
The Adjustment Period controls when and how often your interest rate changes. For example, if your ARM has an adjustment period of 1 year, your interest rate will be subject to change at the end of each year and your monthly mortgage payment will be recalculated to reflect this change.
Interest rate caps are built into the loan to protect the borrower from drastic interest rate fluctuations. The caps limit how much the interest rate or monthly payment can change at the end of each adjustment period. An ARM can also have a cap for the life of the loan. For example, during the life of a loan, the interest rate can only be increased by 5%.
The Initial Interest Rate is the interest rate that you start with at the beginning of your loan period. The length of time your loan stays at this rate is built into the loan. For example, you may stay at the initial interest rate for 1 year, 5 years, or another length of time depending on your specific mortgage. This type of ARM is generally referred to as a Hybrid ARM. The initial interest rate for an adjustable rate mortgage is generally lower than that of a fixed rate mortgage.Back to Table of Contents
Dont Miss a New Listing Again!
Already registered? Login
FREE AUTOMATED EMAIL UPDATES
Sign in to take advantage of all this site has to offer. Save your favorite listings and searches – also receive email updates when listings you like come on the market for free!
*Contact Information NOT Shared*
Robin Rotella Team
Keller Williams Integrity First Realty
6641 S Kings Ranch Rd, Suite 1
Gold Canyon, AZ 85118
Robin Cell: 480-225-7445
Home | Open Houses | Our Listings | Search for Homes | Advanced Search | Map Search | Foreclosures | Commercial Search | Gold Canyon By Subdivision | Client Reviews | About Us | Local News | Meet the Team | Gold Canyon Blog | Contact Us | Real Estate News!!! | Gold Canyon Homes | Gold Canyon All Subdivisions | Homes for Sale in Gold Canyon, AZ under $200,000 | Homes for Sale in Gold Canyon, AZ from $200,000 to $300,000 | Homes for Sale in Gold Canyon, AZ from $300,000 to $400,000 | Homes for Sale in Gold Canyon, AZ from $400,000 to $500,000 | Homes for Sale in Gold Canyon, AZ from $500,000 to $600,000 | Homes for Sale in Gold Canyon, AZ from $600,000 to $700,000 | Homes for Sale in Gold Canyon, AZ over $700,000 | Mortgage Rates | Buyer/Seller Info | Gold Canyon Community Info | Natural Hazards in Arizona | FREE kw Search App | Best Local Movers
© 2019 Arizona Regional Multiple Listing Service, Inc. All rights reserved. All information should be verified by the recipient and none is guaranteed as accurate by ARMLS. Information deemed to be reliable but not guaranteed. Real estate listings held by brokerage firms other than Robin Rotella PLLC are marked with the ARMLS logo and detailed information about them includes the name of the listing brokers. Listing broker has attempted to offer accurate data, but buyers are advised to confirm all items. Only IDX residential listings are displayed on this site. The information being provided is for consumers' personal, non-commercial use and may not be used for any purpose other than to identify perspective properties consumers may be interested in. This site will be monitored for 'scraping' and any use of search facilities of data on the site other than by potential buyers/sellers is prohibited. Information last updated on 2019-09-17.