Adjustable Rate Mortgage Arm 2


Definition of "Adjustable rate mortgage (arm)"

Garrett & Terri Fox
Garrett & Terri Fox Nathan Grace Real Estate

Mortgage agreement that provides initial monthly payments of a relatively low amount (compared with a fixed rate mortgage). This initial amount is subject to periodic changes based on a stipulated index. Index usually used is the change in the rates of United States Treasury bills. Home buyers considering an ARM should compare ARM's offered by the various lending institutions in the following manner:

  1. first-year rates;
  2. how the interest rate is calculated in future years;
  3. what the one-year and lifetime caps are on the maximum rate;
  4. rules for conversion to a fixed rate mortgage.

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