ARMS are adjustable rate mortages. People usually use arms because they are usually cheaper ..ie a better interest rate than the fix mortgages. The A in Arm stands for adjustable which means they they will change after a given period of time. Does that make the arms a bad product? Not necessarily. They could be the right choice for a number of people. Here are some common ARMS:
10/1 ARM Mortgage - the rate is fixed for 10 years, then adjusts every year (up to the cap, if any)
7/1 ARM Mortgage - the rate is fixed for 7 years, then adjusts every year (up to the cap, if any)
1 Year ARM Mortgage - the rate is fixed for one year then adjusts annually up to any caps you have a periodic cap of 1% per year. If rates rise 3% during that year, your ARM mortgage rate will only rise 1%
Comments(0)