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Landlord Stuff > Landlord Help > Adjustable Rate Mortgage
Adjustable Rate Mortgage
An adjustable rate mortgage has a fixed interest rate at the time the mortgage is secured. At the start of the loan, the payment is also fixed. Neither the interest rate, nor the payment are fixed for the life of the mortgage, however.
After the initial fixed period, both the interest rate and the monthly payments are adjusted to reflect the then current market interest rates. The calculations to determine the adjustment is at the discretion of the lender, each using their own formula and index.
Advantages:
- Lower monthly payment at the beginning of the loan.
- Rates and payments may go down if rates go down.
- A borrower may qualify for a larger loan.
Disadvantages:
- Higher risk.
- Payments may rise as rates rise.
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