Adjustable-Rate Mortgage Loans (ARM)

An adjustable-rate mortgage is a loan with interest rates that are adjusted periodically based on changes in a pre-selected index. As a result, the interest rate on your loan will rise and fall with increases and decreases in overall interest rates. If interest rates rise, you can expect to see an increase in what you pay monthly as well.

An adjustable-rate mortgage often comes with an interest rate cap, which limits the amount by which the interest rate can change; look for this feature when you consider an ARM loan. Though they do have the potential to raise your monthly payments, an adjustable-rate mortgage can make a big difference in lowering your monthly payments, too.

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