Adjustable Rate Mortgages

Adjustable rate mortgages are more commonly known as ARMs. These home loans are also an offshoot of conventional financing and offer a home buyer a lower interest rate for a predetermined amount of time. Normally, the lower interest rate is only applicable during the first three to five years of the loan. After that point, the interest rate will continue to rise up to 3 to 5 percent over the original interest rate on the term of the loan. Adjustable rate mortgages can be refinanced to a lower, fixed rate mortgage if an individual is credit worthy at the time the ARM matures; however, a penalty is often assessed for refinancing.

Posted in: Types of Home Loans