An Adjustable-Rate Mortgage (ARM) is a type of loan whose prevailing interest rate is tied to an economic index (like one-year Treasury Bills), which fluctuates with the market. The three most popular types of ARMs are one-year ARMs, which adjust every year, three-year ARMs, which adjust every three years, and five-year ARMs, which adjust every five years. When the loan adjusts, the lender tacks a margin onto the economic index rate to come up with your loan’s new rate. ARMs are considered riskier than fixed-rate mortgages, but their starting interest rates are generally lower than a longer-term rate. Learn more about ARMs and other mortgage options here.
Mortgage Mess: Sorting Through A Myriad Of Options Different ARM Products
Sorting through the mortgage morass to find the right loan for your purchase is tough enough to give anyone a headache. And with the recent introduction of a new mortgage product, the going just got tougher. The 10-year adjustable rate mortgage gives home buyers the steadiness of a fixed-rate loan at an interest rate that is around a half-point less than a 30-year fixed rate loan.