Adjustable Rate Mortgages (ARM)

Adjustable Rate Mortgages (ARM) is a type of home loan where the interest rate may change periodically based on a specific benchmark or index. Typically, ARM loans offer a lower initial rate compared to fixed-rate mortgage, which can lead to lower initial payments.

Key features include:

Initial Rate Period: The loan starts with a fixed interest rate for a specified period.
Adjustment Period: After the initial period, the interest rate adjusts at predetermined intervals (e.g., annually).
Index and Margin: The interest rate is tied to an index (e.g., LIBOR, SOFR) plus a margin set by the lender.
Rate Caps: Limits on how much the interest rate can increase at each adjustment and over the life of the loan.
Payment Changes: Monthly payments may increase or decrease based on interest rate adjustments, which could affect your overall loan costs.

Before choosing an ARM, consider how potential rate changes could impact your monthly payments and overall financial situation. Always review the loan terms carefully and consult with a financial advisor if needed.

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