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1, 2, 3, 5, 7, 10 Year Adjustable Rate Loan Programs
An Adjustable Rate Mortgage (ARM) is a mortgage loan that is most widely known for its low starting interest rate (when compared to the 30 & 15 year mortgage loans). This 'low' introductory rate is used to calculate the mortgage payment for a specified period of time. Once this introductory period is over, the interest rate is adjusted periodically based on a preselected index. The most commonly used index is the yield on the one-year Treasury Bill. The new interest rate is determined by adding this index to a set margin (which is determined by the lender). Although there are a variety of adjustable rate mortgage programs available, the most common program is the 2/28 which is a two year fixed loan that adjusts after the two year period. Most consumers who get this loan are trying simply trying to either get into a loan or refinance their current loan at the lowest possible rate. APR's on variable rate loans are subject to increase but may decrease from year-to-year, the borrower should be prepared to handle an increase in his/her monthly payment (should the index rate increase).
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