Im a little confused about adjustable rate mortgages. How does an adjustable rate mortgage differ from a fixed rate mortgage?
A. Understanding the complexities of adjustable rate mortgages is no easy task. Unlike a fixed rate mortgage on which interest is paid at the same rate throughout the life of the mortgage, the rate of interest charged on an adjustable rate mortgage (commonly called an “ARM”) will change at least once, and usually many times over the life of the loan. The most common ARMs will provide for interest rate changes either monthly, every 6 months or once every year. The rate changes periodically on a date known as the “change date”.
