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What is an Adjustable Rate Mortgage (ARM) and how does an ARM work?

April 26, 2017adjustable rate mortgage arm

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What is an Adjustable Rate Mortgage (ARM) and how does an ARM work?

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An Adjustable Rate Mortgage (ARM) is a mortgage or deed of trust, which allows the lender to adjust the interest rate periodically as agreed to at the inception of the loan. The interest rate on an ARM is tied to a market index and is fixed for a specific period of time. Once that period of time is over, the interest rate is adjusted periodically (every 6 to 12 months) following the changes in the interest rate of index that is associated with the loan. Examples of market indexes include, but are not limited to, LIBOR, Constant Maturity Treasury, and 11th District Cost of Funds. If you are interested in an adjustable-rate mortgage, it is important to discuss all of the features and options of an ARM with our Mortgage Consultant so they can help you make an assessment of the best ARM to meet your specific needs.