What Is An Adjustablerate Mortgage Arm

Answer for "What is an adjustable-rate mortgage (ARM)?"

Alek Ploetz real estate agent
  Ploetz Group LLC

A type of mortgage in which the interest rate is keyed to a certain economic index and is adjusted as the index rises and falls. If you have this type of mortgage your interest rate could go up or down, depending on the prevailing rates. Adjustable rates tend to move some of the interest rate risk to the borrower.

For those not willing to risk fluctuating interest rates, the fixed rate mortgage (FRM) is a set agreed rate where borrowers can calculate exactly how much they will be charged in every month based on the loan, set interest rate, compounding frequency and time span agreed upon.

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