The adjustable rate mortgage is a mortgage loan with an interest rate that adjusts at set intervals. The frequency at which the adjustable rate mortgage adjusts, depends on the borrowers choice during financing.
There are many different adjustable rate mortgage products available with 3/1, 5/1, 7/1 being the most common. The first number in loan program is for how many years the interest rate remains fixed.
The second number is for how often the rate will adjust after the fixed period ends.
Read more: What Is An Adjustable Rate MortgagesAdjustable Rate Mortgages, also known as ARM loans, are an alternative to fixed rate mortgages. When you buy a home, the format of your interest rate is one of the primary decisions you will have to make.
There are benefits and drawbacks to both setups. What are some of the benefits of adjustable rate mortgages?
The first benefit of adjustable rate mortgages is that you do get a lower interest rate in the beginning. The second benefit is that for some initial time period, this rate is usually fixed.
Read more: 3 Adjustable Rate Mortgage Benefits