How do adjustable-rate loans work?
Adjustable-rate mortgages (ARM) have interest rates that change periodically, typically in relation to an index. While the monthly principle and interest payments that you make with a fixed-rate mortgage stay the same, payments on an ARM loan will change at the adjustment date set forth in your loan terms. ARM mortgages are typically fixed for the first two to seven years before the payment and rate adjust (the rates typically adjust every six to twelve months after the initial 2 to 7 year fixed period). There are advantages and disadvantages to an adjustable rate mortgage. ARM loans can be a good option for customers who don’t plan to live in their home longer than the 2 to 7 year period the adjustable rate loans are typically fixed for, meaning you’ll have a lower payment during this period of time than you would with a fixed rate mortgage. ARM mortgages can also be great for people who anticipate making more money in the future, but want a lower and more affordable payment on their
