How is an interest only adjustable rate mortgage different than a normal adjustable rate mortgage?
Interest Only 3/1 or 5/1 ARMs differ from regular ARMs because only interest is charged for the first 3 or 5 years on a 30 year amortization schedule. After 3 years with the 3/1 Interest Only ARM, the loan becomes adjustable and the loan is amortized over the remaining 27-year term. After 5 years with the 5/1 Interest Only ARM, the loan becomes adjustable and the loan is amortized over the remaining 25-year term.
