Adjustable Rate Mortgage

An Adjustable Rate Mortgage involves an interest rate that can fluctuate over time, as opposed to staying fixed. Typically, there's an initial period with a low, stable rate, after which the rate resets according to an external index (plus a set margin). This shifting monthly payment structure can yield advantages when rates drop but poses additional risk should they climb.

Key Points

• Lower Intro Period: Initial phases often feature below-market interest.
• Review Cycles: Rates adjust yearly or every few years, depending on agreed terms.
• Suitable for Specific Scenarios: Short-term occupancy or stable market predictions.

Borrowers should weigh the odds of future rate movements against their comfort with variable payments. Refinancing or switching to fixed-rate terms can mitigate uncertainty if conditions change unfavorably.